Fed's Going Back To The Drawing Board?
Washington (Jun 4) After a disappointing U.S. jobs report and a sad ISM non-manufacturing index, markets didn't have much reason to rejoice. Job creation tumbled in May, badly missing the expected increase of about 160,000 jobs. The ISM non-manufacturing index fell to 52.9 from 55.3, marking the lowest level since February of last year.
The data, it seems, is now casting doubt on hopes for a stronger economic recovery as well as a Fed rate hike this summer.
Presumptive Republican presidential nominee Donald Trump didn’t think much of the report, either, tweeting, “Terrible jobs report just reported. Only 38,000 jobs added. Bombshell!”
Many experts, including Federal Reserve Chair Janet Yellen, view America's job market at or near "full employment."
But Friday's jobs report is a key factor and perhaps game changer for Fed officials as they prepare for their June 14-15 meeting. Prior to today’s jobs report, the CME Group FedWatch tool of market sentiment saw a 21% chance for a June rate hike. Post report, the odds dropped to just 4%.
May’s employment data are another sign that the U.S. economy is running out of steam. Earlier in the week the Organization for Economic Cooperation and Development downgraded its outlook for the U.S. economy for the third consecutive time; they now see the U.S. economy growing 1.8% in 2016. The organization warned that the global economy is facing a “low-growth trap.”
Post jobs, gold was faring well. Gold prices were trading sharply higher, near its session highs. August Comex gold futures were last up $31.20 an ounce at $1,243.50.
Not only is gold getting a much needed boost Friday, but the long-term rally remains healthy as physical demand was strong in May. Last month the U.S. Mint say its gold bullion coin sales increased more than 200% from May of 2015.
That’s it for this shortened trading week! Enjoy the weekend!