Does little movement in gold mean the buyers are exhausted?
This article first appeared on SchiffGold.
November was the weakest jobs report of the year, coming in at a paltry 210k, missing consensus expectations of 573k by a 363k. There were modest revisions upwards over the last two months of 8k and 15k for September and October respectively. Nothing to be excited about.
Figure 1: Change by sector
This next chart compares the current month with the trailing 12-month average. A few key takeaways:
Figure 2: Current vs TTM
Why was Leisure and Hospitality so low? Last month, the number was 164k. The new Omicron variant is not impacting these figures as that only just surfaced. What if the recovery is nearly complete for L&H? In Feb 2020, there were 16.9M People employed in the sector. As of this month, that sector has 15.6M, still short more than 1.3M jobs.
The broader economy had 152.5M people employed as of Feb 2020 and now only has 148.6M. Leisure and Hospitality makes up 33% of the total job losses still outstanding. If Leisure and Hospitality is reaching a new equilibrium of full employment then which other category can make up the difference? Even worse, if Omicron results in shut downs then L&H could see more job losses in the months ahead.
What does this mean for the Fed if their baseline for the job market is Feb 2020? How can they ramp down tapering and raise interest rates if their employment mandate has not yet been met? Obviously based on the inflation numbers, it’s clear the Fed’s dual mandate should be prompting tighter monetary policy. They are dragging their feet for obvious mathematical reasons. Can they use the weak jobs numbers to justify continued stimulus?
Getting back into the data, the table below gives a much more detailed breakdown of the numbers and the entire labor force. Some key takeaways:
Monthly Average Change | Total % Change | ||||||||
Category | Total Employed | Current Month | 3 Months | 12 Months | 3 years | Current Month | 3 Months | 12 Months | 3 years |
Private Sector | |||||||||
Construction | 7,533 | 31 | 36.3 | 15.0 | 4.1 | 0.4% | 1.4% | 2.4% | 2.0% |
Education Health | 23,772 | 4 | 26.3 | 41.2 | -0.2 | 0.0% | 0.3% | 2.1% | 0.0% |
Financial | 8,905 | 13 | 17.0 | 12.4 | 6.9 | 0.1% | 0.6% | 1.7% | 2.8% |
Information | 2,791 | -2 | 4.3 | 11.8 | -1.7 | -0.1% | 0.5% | 5.1% | -2.2% |
Leisure Hospitality | 15,581 | 23 | 100.3 | 162.4 | -21.9 | 0.1% | 1.9% | 12.5% | -5.1% |
Manufacturing | 12,546 | 31 | 36.0 | 29.2 | -6.5 | 0.2% | 0.9% | 2.8% | -1.9% |
Mining and Logging | 645 | -2 | 0.7 | 4.0 | -2.5 | -0.3% | 0.3% | 7.4% | -14.1% |
Other Services | 5,787 | 10 | 14.0 | 25.2 | -1.5 | 0.2% | 0.7% | 5.2% | -1.0% |
Prof Business | 21,400 | 90 | 107.3 | 84.1 | 8.4 | 0.4% | 1.5% | 4.7% | 1.4% |
Trade Trans Utils | 27,751 | 37 | 86.7 | 64.0 | 1.8 | 0.1% | 0.9% | 2.8% | 0.2% |
Government | |||||||||
Government Federal | 2,879 | 2 | -1.7 | -0.8 | 1.9 | 0.1% | -0.2% | -0.3% | 2.4% |
Government Local | 13,991 | -18 | -33.3 | 26.8 | -14.2 | -0.1% | -0.7% | 2.3% | -3.7% |
Government State | 5,030 | -9 | -15.7 | 8.2 | -3.7 | -0.2% | -0.9% | 2.0% | -2.7% |
Total | |||||||||
All | 148,611 | 210 | 378.3 | 483.5 | -29.4 | 0.1% | 0.8% | 3.9% | -0.7% |
Values in 1,000s of workers. Data as of: Nov 2021. Total Employed = Entire size of the labor market. | |||||||||
This data is subject to revisions as new data becomes available. While the headline release gets a ton of market attention, the revisions get far less. The table below shows the impact of the revisions over different time periods. Please note this is as of the prior month since the most recent month has not seen any revisions. Important items to note:
These revisions are quite large by any standard. In normal times, most job gains come in around 180k-220k which is nearly the size of the three-month average in revisions.
3 Month Compare | 12 Month Compare | 3 Year Compare | |||||||
Category | Current | As Of Published | Avg Month Diff | Current | As Of Published | Avg Month Diff | Current | As Of Published | Avg Month Diff |
Private Sector | |||||||||
Construction | 77 | 63 | 4.7 | 173 | 171 | 0.2 | 123 | 215 | -2.6 |
Education Health | 147 | 92 | 18.3 | 533 | 485 | 4.0 | -1 | 124 | -3.5 |
Financial | 55 | 39 | 5.3 | 146 | 124 | 1.8 | 247 | 205 | 1.2 |
Information | 48 | 59 | -3.7 | 143 | 138 | 0.4 | -59 | -106 | 1.3 |
Leisure Hospitality | 349 | 238 | 37.0 | 1,936 | 1,691 | 20.4 | -805 | -1,218 | 11.5 |
Manufacturing | 126 | 123 | 1.0 | 360 | 299 | 5.1 | -249 | -189 | -1.7 |
Mining and Logging | 10 | 14 | -1.3 | 53 | 60 | -0.6 | -95 | -54 | -1.1 |
Other Services | 68 | 54 | 4.7 | 289 | 247 | 3.5 | -69 | -24 | -1.2 |
Prof Business | 371 | 234 | 45.7 | 1,014 | 769 | 20.4 | 232 | 234 | -0.1 |
Trade Trans Utils | 305 | 248 | 19.0 | 867 | 755 | 9.3 | 70 | 213 | -4.0 |
Government | |||||||||
Government Federal | -6 | 0 | -2.0 | -98 | -89 | -0.8 | 72 | 69 | 0.1 |
Government Local | -107 | -132 | 8.3 | 346 | 317 | 2.4 | -494 | -587 | 2.6 |
Government State | -35 | -72 | 12.3 | 94 | 60 | 2.8 | -147 | -335 | 5.2 |
Total | |||||||||
All | 1,408 | 960 | 149.3 | 5,856 | 5,027 | 69.1 | -1,175 | -1,453 | 7.7 |
Values in 1,000s of workers. Because this data is focused on revisions, it is as of the month prior: Oct 2021. "Current" shows the change in employment after revisions. "As Of Published" shows change in employment at time of release. "Avg Month Diff" shows the average monthly change from the revisions. | |||||||||
The chart below shows data going back to 1955. As the labor force has grown in total aggregate numbers, the recessions along the way have caused dips in the general trend. But the trend is still clearly upward.
The Covid recession can be seen as the greatest job market loss. The chart also shows how much work the labor market still requires to regain the employment level seen prior to Covid (top far right draw down). As mentioned above, the job market had 152M people. That number currently sits at 148M. The job market is still 4M people short. At 200k a month, it would take almost two more years for the market to recover to pre-pandemic levels. Nevermind the natural growth of employment typically seen in the economy.
In the latest period, the unemployment rate fell sharply from 4.6% to 4.2% (it was 3.5% pre Covid). This occurred even as labor force participation increased from 61.6% to 61.8% (Figure 4).
Figure 3: Historical Labor Market
The distribution of the workforce has changes significantly over the last 65+ years. For example, in 1955, manufacturing accounted for 30% of jobs vs 8.4% today. Education/Health Care has tripled from 5% to 16%.
Although the unemployment rate has been sharply falling over the last year (chart above), the labor force participation (61.8%) is still well below pre-pandemic levels (63.4%) and much lower than the 66% pre financial crisis. The current trend has flatlined.
Figure 4: Labor Market Distribution
Gold and silver have been hammered recently. In last month’s jobs analysis, gold showed a lot of strength in the face of a strong jobs number. It finally broke through $1800 and charged up to $1879 on hot inflation data. Unfortunately, weak handed traders bailed when Powell was renominated. Still a baffling move considering Powell has led the Fed to the greatest expansion of the money supply ever.
Today, gold is up but the move does not match the weakness in the report. Similar to last month where the sellers seemed exhausted, it could be possible the buyers are currently exhausted (for now). They will be back though. Currently, sentiment is still bearish, especially with a Fed that has become just a touch more hawkish in their rhetoric. This despite their actions not matching up to their words, as seen in a balance sheet that grew $126B in November.
Stepping away from the daily price moves shows a more concerning trend. As mentioned above, what if the job recovery is mostly over? The economy is still well short of full employment despite a rate nearing 4.0%. How hawkish can the Fed get into a weakening economy? How many rate hikes can the market handle before the bubble finally pops? Not many! The Fed hasn’t even stepped away, but they will be back aggressively printing if the job market shows further weakness. Gold and silver offer the protection needed against the irresponsibility on display at the Eccles building.
Data Source: https://fred.stlouisfed.org/series/PAYEMS and also series CIVPART
Data Updated: Monthly on first Friday of the month
Last Updated: Nov 2021
Interactive charts and graphs can always be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/USDebt/