No matter how you cut it, doom and gloom are perfect catalysts for the gold price. Because precious metals don’t pay dividends and are tied to big market cycles, holding them excessively imposes opportunity risks. In this context, it’s hard to imagine that goldbugs looked at the jobs report for November 2019 with much joy.
On print, the U.S. economy added more jobs than analysts and experts anticipated…a lot more. Prior to the jobs report disclosure, economists predicted a consensus increase of 180,000 non-farm payrolls last month. However, actual payrolls came in at a resounding 266,000 jobs. In the month of October, the change in non-farm payrolls was +156,000.
Furthermore, the unemployment rate dropped from 3.6% in October to 3.5% in November. Regarding this metric, economists anticipated no change. Also, average hourly wages year-over-year increased 3.1%, whereas experts pegged a 3% increase.
Notably, the private sector added 254,000 positions last month, greatly exceeding the target calling for 178,000 jobs. For reference, October brought in 163,000 positions. And as you know, a healthy private sector typically equates to a healthy economy.
Not surprisingly, the bid price of gold dropped 1% to just under $1,460. Is the jobs report the kiss of death to precious metals and the contrarian position broadly? I wouldn’t bet on it and here’s why:
Jobs Report Numbers Tell Only Half the Story
There’s no point in denying it. From a nominal tally perspective, the November jobs report was downright impressive. From the job growth in the private sector to the reduction in unemployment to wage growth, the economy killed it.
However, the segmented numbers raise some eyebrows. For instance, the education and health services industries added 74,000 jobs, more than double what these sectors added in October. Ordinarily, investors should be encouraged at this remarkable performance.
But one key criticism is that education and health services are “overbought” markets. That is, they’re artificially inflated. Consider the exponentially rising cost of college education in the U.S. Such meteoric growth is unsustainable, suggesting that the job growth it creates is likewise untenable.
Further down the categorizations, business services and leisure added 38,000 and 45,000 jobs, respectively. But how robust will these segments be if we don’t get a resolution to the U.S.-China trade war? While sentiment here appears positive, you just never know with the Trump administration.
Finally, retail hiring slowed down dramatically, adding only 2,000 new jobs in November. That pales in comparison to the 22,000 positions created in October. This could be a signal that the retail market isn’t as robust as Black Friday and Cyber Monday sales would have you believe.
Either way, I believe we have plenty of questions that make the November jobs report somewhat suspect. In other words, believe the mainstream narrative at your own risk.