Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Government Jobs Account for Nearly a Quarter of July Gains

  by    0   2

The BLS provides an employment picture of the US on the first Friday of every month. It estimates how many jobs were added or subtracted by sector. While some of the assumptions may be controversial (e.g. the birth/death model) and job numbers are prone to revisions, it remains the most widely anticipated statistic each month by the financial markets. Considering its popularity, the job numbers are heavily analyzed by many sources. This article uses visuals and historical data to provide greater insight and perspective.

Recent Trends

The latest jobs number showed an increase of 943k jobs, This beat expectations by 100k. Unfortunately, 240k gains came from government employment — essentially non-productive jobs that weigh on the economy.

As shown below, 943k is above the recent trend and the largest monthly gain since August 2020. Leisure and Hospitality continue to show the biggest gains, which is not surprising considering the massive layoffs they saw early in the pandemic and that unemployment benefits have recently been removed in some states. The unemployment rate ticked down from 5.9% to 5.4%.

Figure: 1 Change by sector

This next chart compares the current month with the trailing 12-month average. A few key takeaways:

  • Government hiring was well above average. 240k added vs -2k avg
  • Leisure/Hospitality and Education/Health nearly doubled the TTM average
  • Construction, Professional Business, and Trade/Transport/Utilities were all below TTM average

Figure: 2 TTM vs Current

The table below gives a much more detailed breakdown of the numbers and the entire labor force. Some key takeaways:

  • Government job increases were dominated by local governments (+230k) vs 18k in Federal and -8k at the State level
  • Leisure and Hospitality have seen the biggest 12-month rebound, averaging 196k a month. This has accelerated in recent months to 364k likely a result of expiring unemployment benefits as stated above.
    • Even with these gains, it is still down 7.7% from where it was 3 years ago
  • Mining and Logging are still down 14.6% but the recent recovery has doubled from 3.7k TTM vs 6k in the current period.
  • Trade, Transportation, and Utilities is the largest sector (27k) but growth in jobs slowed in the recent period to 47k down from a TTM avg of 97k.
  • In aggregate the job market is still 1.5% smaller than it was 3 years ago.

Figure: 3 Labor Market Detail

Revisions

As mentioned, 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:

  • The recent three-month period has been revised up by 48.7k a month.
  • The biggest upward revisions were seen in Leisure/Hospitality and Trade/Transportation.
  • Over the last year, revisions have been positive of nearly 40k a month or about 500k in aggregate.

Figure: 4 Revisions

Historical Perspective

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. The Covid recession can be seen as the greatest job market loss since 1955. The chart also shows how much work the labor market still requires to regain the employment level seen prior to Covid.

Figure: 5 Historical Labor Market

The distribution of the workforce has changed significantly over the last 65+ years. Although the unemployment rate has been sharply falling over the last year (chart above), the labor force participation (61.7%) is still well below 18 months ago (63.2%) and much lower than the 66% pre-financial crisis.

Figure: 6 Labor Market Distribution

What it means for Gold and Silver

The stock market is hyper-focused on the labor market because the Fed uses the data as one of its primary drivers for monetary policy. Although jobs data is seen as a lagging indicator, a strong labor market would more likely result in a tighter Fed. Weak job numbers allow the Fed to be more accommodating in monetary policy. This will result in more quantitative easing, growing the fed balance sheet. Additionally, fiscal support may be stronger in a weak labor market coupled with falling tax revenues. This could put more strain on the federal budget which will only increase the total debt outstanding.

While the market may anticipate tighter monetary policy and less fiscal support in a strong labor market, the Fed is painted into a corner and cannot scale back the monetary stimulus without devastating the economy. Thus, the job numbers may impact short-term movements in the price of gold and silver due to speculative flows, but the long-term positive fundamental outlook should not be impacted by strong job numbers, especially when dominated by Government job gains like the most recent report.

Data Source: https://fred.stlouisfed.org/series/PAYEMS and also series CIVPART

Data Updated: Monthly on first Friday of the month

Last Updated: Jul 2021

Interactive charts and graphs can always be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/USDebt/

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Foreign Holders Join the Fed in Reducing Holdings

Breaking Down the Balance Sheet The Fed balance sheet fell during May by $25B. This was the first monthly decline in the balance sheet since $220B of “Other” rolled off in July 2020. In that case, “Other” were repurchase agreements with foreign entities to provide liquidity and alleviate stress in the global markets.

READ MORE →

Monthly M2 Shrinks for the First Time in Over 12 Years

According to the seasonally adjusted data, M2 contracted by $83B in April. The Money Supply analysis last month highlighted the slowing money supply growth rate, but this is the first contraction seen since January 2010.

READ MORE →

Technical Analysis: Has This Gold Pullback Run Its Course?

The price analysis last month identified the near-term risk that gold could fall below $1880 and even $1850 despite a medium-term bullish outlook. The $1800 level was identified as a key marker for keeping the bull move intact. So far, that has held and produced a solid bounce back towards $1850 which becomes the next hurdle.

READ MORE →

Comex Countdown: Gold Shows Strength while Silver Sees Cash Settlement

This analysis focuses on gold and silver physical delivery on the Comex. See the article What is the Comex for more detail.

READ MORE →

Comex: Total Inventory Grows but Supply to Meet Delivery Shrinks

This analysis focuses on gold and silver within the Comex/CME futures exchange. See the article What is the Comex? for more detail. The charts and tables below specifically analyze the physical stock/inventory data at the Comex to show the physical movement of metal into and out of Comex vaults.

READ MORE →

Comments are closed.

Call Now