(Kitco News) –Gold prices turned positive Friday as the U.S. economy created fewer jobs than expected last month, according to the latest data from the Labor Department.
The Bureau of Labor Statistics said 164,000 jobs were created in April; economists were expecting to see job gains of 190,000. Looking at revisions, February’s data was revised down to 324,000 jobs, down from the previous report of 326,000; however, March’s employment data was revised up to 135,000 jobs, up from the initial report of 103,000 jobs.
“After revisions, job gains have averaged 208,000 over the last 3 months,” the report said.
The unemployment rate dropped more than expected falling to 3.9%. While the unemployment rate dropped many economists note that the participation rate remains high at 62.8%.
Gold prices were under modest pressure ahead of the report but have reversed its losses in initial reaction. June gold futures last traded at $1,313.90 an ounce, up 0.10% on the day.
Not only was the headline employment number disappointing but wage gains remain elusive, increasing less than expected. The report said that average hourly earnings increased by 0.1% last month or four cents to $26.84. Economists were expecting to see 0.3% gains. For the year wages have increased 2.6%.
Some economists have noted that without wage inflation, the Federal Reserve will be unable to raise rates aggressively this year, which will be positive for gold prices.
Andrew Grantham, senior economist at CIBC World Markets, shrugged off the disappointing headline numbers, say that the employment data is still within an uptrend. However, he said that the surprise remains the weak wage growth. Overall he said that the data is slightly negative for the U.S. dollar and positive for fixed income, which both are positive drivers for gold prices.
“They do seem to confirm our view that there’s no need to expect a faster pace of hikes going forward given inflationary pressures remain relatively tame,” he said.
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