Gold and Silver Bounce on NFP Miss, 115k Jobs Added - Stocks Down
Friday, May 4, 2012
It was an up and down day for precious metals, but gold and silver managed to close near their highs of the day to finish out the week. Meanwhile stocks and oil prices slumped following a weak April non-farm payrolls report. Jobs added in April totalled a scant 115k, well below the 165k estimate, and following an upwardly revised 154k in the prior month. The unemployment report surprisingly fell to 8.1% from 8.2%.
Crude prices tumbled with WTI crude futures ending the day below the $100 level, off $4.01 at $98.53 per barrel.
Despite the drop in the unemployment rate, a look beneath the numbers paints a bleak picture. The U.S. labor force continues to shrink at an alarming rate, dropping 522,000 in April. The labor force participation rate is at a new 30 year low at 64.3%. While it would appear that more people are gainfully employed in the U.S due to the fall in the unemployment rate, the real reason is the alarming fall in the unemployment rate's denominator.
Just as disturbing, the monthly birth/death adjustment added 206k jobs in the month. For those that are unfamiliar with this statistical game, the birth/death adjustment is a guesstimate of jobs added from the creation of new firms not yet in the overall statistical sample used to generate the monthly employment figures, less the loss of employees from the death of firms. The 206k added is much higher than that seen in 2011 and 2010, and comes after revelations that the pace of new business formation in the U.S. has fallen to 7%-8% from 12%-13% in the 1980s. (read Washington Post article). Something is clearly amiss since declining business formation means a lower rate of "births." Yet somehow, magically, the birth/death adjustment for April of 2012 trounces the comparable adjustments for 2010 and 2011.
Stocks immediately fell on the news while precious metals were quick to push into the green following modest overnight declines. Trading action was volatile, but both gold and silver finished near their highs. Spot gold prices were up $6.93 at $1,643.25 per troy ounce. Spot silver prices were up $0.28 at $30.17 per troy ounce. The gold-silver ratio is at 54.18.
Commodities outside precious metals were broadly lower. WTI crude futures fell below $100, down $4.01 at $98.53 per barrel. Copper futures fell a more modest $0.017 to $3.719 per pound.
As might be expected, Treasuries soared from the payroll miss with the yield on the benchmark 10-year Treasury at 1.88%. The USD was broadly higher.
The upcoming IPO of Facebook draws ever nearer. Pricing estimates currently put the IPO price between $28-$35 per share. Mark Zuckerberg, the founder is poised to become among the world's richest individuals. However, the company has yet to prove that the social media giant can post revenue and earnings numbers for a valuation that could approach $100 billion. The company is offering $11.8 billion in the IPO, depending on the final IPO price.
Chinese stocks have been rising of late, this despite mixed to poor data. Overnight, Chinese indices rose to a 7-week high. Commentators are suggesting that the gains are being driven by expectations of further monetary policy easing.
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