Dear PGM Capital Blog readers,
In this weekend’s blog edition, we want to discuss with you the USA September jobs report, which came out on Friday, September 2, 2016.
On Friday September 2, at 8:30 am EST, the USA Bureau of statistics (BLS), reported that the U.S. economy hired 151,000 non-farm workers in August, disappointing analyst expectations of 180,000 jobs.
The private sector added only 126,000 jobs.
As can be seen from below chart, the majority of jobs added in August (54%) fell below the measured median wage of US$ 25.00 per hour.
Above chart shows also that 28% of new hires fell into the lowest-paying of the 12 wage brackets.
- Restaurants and bars, which with an average hourly wage of just US$ 13.47 per hour, the second-lowest paying industry in the USA, added 34,000 workers in August and has hired in 2016 up to now, 312,000 workers.
- Social assistance businesses, which pay on average just US$ 15.93 per hour, came in second with 21,700 workers in August.
The unemployment rate remained flat at 4.9%, despite expectations of a decline to 4.8%, while hourly earnings rose just 0.1%, also missing expectations of 0.2% increase, and down sharply from last month’s 0.3% rebound.
The labor force participation rate remained flat at 62.8% as the number of people not in the labor force rose by 58,000 as can be seen from below chart.
PGM CAPITAL ANALYSIS AND COMMENTS:
The FED:
The August jobs report was a critical one for the Federal Reserve, whose leaders hinted that they could use it as a guide to potentially raising the key interest rate at their meeting of September 20-21.
A Fed rate hike was likely a given only if the report would have been very strong. However, August job gains fell below expectations, for which reason the odds of a September rate hike have dropped to 12% after hovering around 27% before the report.
On top of it the jobs-report came on the heels of news on Thursday, September 1, that the manufacturing sector contracted in August for the first time in six months, which had already cast a shadow on a rate hike at the Fed’s September 20-21 policy meeting.
The Capital Markets:
For the markets, the story is still the same: It still likes bad news.
Due to this markets all over the world reacted positively on the bad jobs reports because it is a confirmation that it will keep the Fed on the sidelines for a few more months, or may be for the rest of the year.
A weakening of the dollar in the wake of the US employment data helped dollar-priced commodities and commodity stocks climbed worldwide.
Due to this, the mining-heavy British, FTSE 100, was the best performing market in the West, on last Friday, it gained 2.2% – or £38billion in market value – to close the day just shy of the 6,900 barrier as can be seen from below chart.
Precious metals:
With chances of a rate-hike in September and possibly for the rest of this year to diminish, Gold’s and Silver appreciated on Friday September 2, with respectively 0.94 percent and 2.88 percent, to close at respectively US$ 1,324.69 and US$ 19.41 per Troy Ounce as can be seen from below charts.
For the rest of the year we are bullish on Gold, which based on its seasonal tendencies, stand in stark contrast to the stock market’s, where September is by far the worst month of the calendar.
As can be seen from below chart, which shows the average monthly performance of Gold since 1973, it has produced an average return of 2.2% in September.
Last but not least, before following any investing advice, always consider your investment horizon, risk tolerance and financial situation and be aware that markets can remain longer irrational than that you can remain solvent and that prices of precious metals and the stock of their producers might be very volatile and that sharp corrections may happen in the short term.
Until next week.
Yours sincerely,
Eric Panneflek