The recent weakness in the U.S. labor market, marked by lower-than-expected job creation in August, has further buoyed gold prices. According to a report from private-sector payroll processor ADP, the U.S. added just 99,000 jobs last month, falling short of the anticipated 144,000.
Nela Richardson, ADP’s chief economist, highlighted a notable slowdown in hiring after two years of robust growth. “The job market’s downward drift has led to slower-than-normal hiring,” she stated. “The next key indicator to watch will be wage growth, which appears to be stabilizing following a sharp post-pandemic deceleration.”
Additionally, July’s job figures were revised down from the initially reported 122,000 to 111,000.
Gold prices, which were already on a bullish trajectory before the report, gained momentum following the disappointing data. December gold futures traded at $2,550.60 an ounce, marking a nearly 1% increase on the day.
Despite the underwhelming headline numbers, the report showed stability in wage inflation. Wages for workers who remained in their positions rose by 4.8% in August, consistent with July’s figures. Meanwhile, wages for job changers increased by 7.3%, also unchanged from the previous month.
Although job growth has slowed to its lowest level since October, the report did not indicate significant layoffs.
The job gains were unevenly distributed across sectors. The goods-producing sector added 27,000 jobs in August, with 8,000 positions created in natural resources/mining and 27,000 in construction. However, manufacturing saw a decrease of 8,000 jobs.
In the service sector, job creation was more volatile. The sector added 72,000 jobs, with trades/transportation and utilities contributing 14,000. The IT sector experienced a loss of 4,000 jobs, while the financial sector added 18,000 positions. Professional and business services reported a decline of 16,000 jobs. Education and healthcare saw an increase of 29,000 jobs, and leisure and hospitality added 11,000. Other services contributed 20,000 new positions.
Analysts observe that gold remains buoyed by shifting market expectations. A second consecutive day of weak labor market data has increased speculation that the Federal Reserve might cut interest rates by 50 basis points later this month.
