The Labor Department reported this morning that non-farm payrolls for August grew by 151,000 jobs, against expectations of 180,000 by economists. Just to rub it in, July's employment numbers were revised upward by 20,000 jobs to 275,000. This big miss in employment numbers had the immediate effect of deflating speculation that the Federal Reserve would raise interest rates at their next policy meeting on the 21st.
The news sent the dollar sharply lower. It bounced back almost immediately, but not enough to regain positive territory. The payrolls report gave a boost to gold prices, which had been holding steady ahead of the news. Spot gold jumped $18 an ounce immediately after the release of non-farm payrolls numbers, before giving back about 1/3 of the spike to trade between $1,320 and $1,325. Spot silver prices vaulted 2.3% higher on the news, to ease only slightly afterward.
Gold prices were down in early trading Thursday, before a disappointing ISM Manufacturing Index report at 10 am lifted prices. December gold futures added $5.70 to settle at $1,317.10 an ounce. Spot gold's gains were similar, $5.10, to close at $1.313.60 an ounce. December silver futures added 23 cents to settle at $18.94 an ounce. Spot silver briefly hit the $19 mark before closing up 23 cents as well, at $18.86.
Stocks finished Thursday with tiny gains. The Dow closed 0.1% higher, while the S&P 500 lost the same amount. The Nasdaq ended up by 0.3%. The bad ISM Manufacturing Index report had all three indices in the red in midday trading.
That manufacturing report showed contraction in US factory activity for the first time in six months. The reading of 49.4 was a shock to analysts who were expecting a print of 52. July's number was 52.6.
This disappointing news ended up being a harbinger of today's dismal non-farm payrolls report. Not only was this morning's headline numbers worse than expected, unemployed remained at 4.8 for the third month in a row, against expectations of a drop to 4.8%. Hourly earnings also saw slower gains, rising by 0.1% compared to last month's 0.3%.
Traders have been thrown back into a sentiment of uncertainty by this payrolls miss. Had the employment numbers been close to, or over the forecast of 180,000 new jobs, a September rate hike by the Fed would have been all but assured. Now, economists are back to trying to weight the effects that each piece of data will have on the Fed's rate hike calculations.
The oil market was hammered for a fourth day Thursday, with West Texas Intermediate losing 3.5% to settle at $43.16 a barrel. Brent crude contracts fared almost as bad, dropping 3.1% to settle at $45.45. Over the last two days, WTI has fallen 7.1% and Brent has lost 5.9%.
Recent comments out of Russia that they were comfortable with $50 oil, and that they weren't really interested in joining OPEC talks to hammer out a production freeze has been almost as bad a headwind for oil prices as the news that US crude stockpiles continue to build.
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