At 20:15 GMT on Thursday, the U.S. ADP employment data for May was released, recording an increase of 978,000, a record high since June last year, and also higher than the expected 650,000. The previous value was revised downward from 732,000 to 624,000.
After the data was released, spot gold briefly sank $3 to $1890.6/oz; the dollar index briefly moved nearly 10 points higher and is now at 90.12. It should be noted that a few minutes before the release of the small non-farm payrolls, spot gold fell back below $1890/oz, down nearly 1% during the day.
The subsequent release of the initial claims report caused gold bulls to suffer a second blow. U.S. initial jobless claims for the week of May 29th were recorded at 385,000, a new low since the week of March 14th last year. This data echoes the earlier release of data – the U.S. challenger business layoffs in May recorded 24,580,000, continuing to hit a new low since June 2000.
As of 21:40, spot gold fell below $1870/oz, down over $40 from its daily high; spot silver fell over 3% intraday. The U.S. dollar index DXY rose 0.50% during the day and is now at 90.37.
Specific data at a glance: which sector contributed the most?
The ADP report showed that professional/business services employment increased by 68,000 in May, compared with an increase of 104,000 in April.
Financial services employment increased by 20,000 in May, compared with an increase of 11,000 in April.
Trade/transportation/utilities employment increased by 118,000 in May, compared with 155,000 in April.
Manufacturing employment increased by 52,000 in May, compared with an increase of 55,000 in April.
Construction employment increased by 65,000 in May, compared with an increase of 41,000 in April.
ADP chief analyst Nela Richardson commented that private sector employment data has improved significantly in recent months, the strongest gain since the early recovery. While employment at goods producers is growing steadily, service providers contributed the largest share of growth, far exceeding the monthly average rate of growth over the past six months. Companies of all sizes experienced employment gains, reflecting the epidemic and improving economic conditions.
Market Commentary: A superb report!
Forexlive analysts noted that the April data was revised downward, but this was a very strong report. This trend shows that the U.S. job market is clearly improving at an accelerated pace.
Reuters commented on the U.S. ADP employment numbers for May, saying that U.S. private sector employers increased hiring in May as the economy reopened quickly and demand was strong, but labor and raw material shortages remain a concern for the job market recovery.
Will this data signal that Friday’s non-farm payrolls report will also perform well? As things stand, the market is generally pessimistic about this data, and Fed official Kaplan has said, “Don’t expect too much from the May nonfarm payrolls data”. However, the small non-farm payrolls unexpectedly positive, do not exclude the market expectations will turn.
However, regardless of the non-farm figures, the Fed will not change its current stance. If the data is less than expected, the Fed will have no need to turn hawk, and the call for QE tapering in the market will diminish, not to mention that the bad data may be attributed to the lack of stimulus for companies in hiring workers, rather than a substantial lack of labor demand; conversely, if the data is better than expected, Powell will still insist that now is not the time to talk about or consider tapering, and he may emphasize that one data point will not reflect too much.
On the other hand, regardless of the results of the May jobs report, the discussion between Democrats and Republicans about the Biden-based program will only intensify. A report with poorer data would give Republicans new ammunition. Biden already proposed a $1.9 trillion stimulus bill earlier this year, and they will likely point out that excessive relief measures are not conducive to getting the workforce out to work. Republican Rep. John Carter then cried out.
“A disappointing jobs report and a looming inflation disaster means the economic plan isn’t working, Mr. President.”
But for the Democrats, this will be another great opportunity to peddle an infrastructure bill. To sell the infrastructure bill, the Democrats have “doubled down” by claiming that the infrastructure plan will help more Americans get back to work while rebuilding better homes. If the jobs report is bad, Biden may shout even harder about the $4 trillion infrastructure plan.