Except for the two previous months, for more than the past four years, the prices of gold and silver have been clobbered in the day or two before the monthly US jobs reports have been issued. Strong buyer demand in the past two months has overcome these suppression efforts.
The release of jobs data is one of the times during the monthly or other cycles when the US government has an incentive for the US dollar to look good and for competing assets like gold and silver to look unattractive. Other times include meetings by the Federal Open Market Committee, the expiration of COMEX and Over the Counter options, and whenever major officials such as the president, chair of the Federal Reserve, or the secretary of the Treasury are giving a significant speech or presentation. If precious metals prices rose coincident with such events, that would be an indication that the government is doing an incompetent job with the economy and the value of the US dollar.
In Asian and European markets on Thursday, October 7, gold rose to another intraday record high at $1,365 and silver again hit a 30-year high when it topped $23.50. When the US markets opened, prices dropped from an onslaught of sell orders. Gold fell all the way down to about $1,320 and silver bottomed about $22.40, before recovering some for the COMEX close (gold at $1,339 and silver at $22.71).
The US jobs report was released at 8:30 AM Eastern time today. The news was considered poor, even by the mainstream media who did not dig into the far worse data that was buried in the details. Reaction was quick. Within minutes, gold and silver prices started soaring. During intraday trading in US markets, gold traded as high as $1,349.50 before settling at $1,344.20. Silver rose as high as $23.29 and finished at $23.09. Both prices traded higher in the electronic ACCESS market which opens a half hour after the COMEX close.
According to the official Bureau of Labor Statistics (BLS) report, the most reported unemployment rate stayed unchanged at 9.6%, despite a decline 95,000 jobs. The net change in jobs reflected a drop of 159,000 government jobs and a gain of 64,000 positions in the private sector, with both of these figures coming in close to consensus projections.
However, there were details in the fine print that showed that this final labor report before the US elections was actually worse than the headline data. The expanded U-6 definition of employment, which includes people who are working part-time because they are unable to find full-time jobs, rose from 16.7% the previous month to 17.1% in today’s report. This increase occurred as the BLS noted that 943,000 people have lost full-time employment in the past two months and are now working part-time.
As I have explained in the past, the BLS overstates the employment number by inserting a birth/death adjustment, a modification that basically double counts the creation of new jobs resulting from America’s growing population. Once a year, usually in January, the BLS wipes out about one million jobs to offset this monthly error. Today’s report was padded by 11,000 jobs from this adjustment.
The BLS today estimated that the cumulative error in overstating jobs has exceeded 500,000 so far in 2010, but that it will not be corrected until the January 2011 report. It also reported that the number of people no longer counted as unemployed because they have been without a job was 1.2 million people in September 2010 (versus 700,000 in September 2009). By aggressively reducing the unemployment rolls in this manner, the US government is able to pretend that the unemployment rate, as bad as it is, is not far higher!
John Williams, who analyzes unemployment, consumer prices, money supply, and other data using methodologies formerly used by the US government (see www.shadowstats.com) last month calculated that the correct US unemployment rate was over 22%. Soon he will update this information for today’s BLS report.
By the way, of the increase of 64,000 private sector jobs in the month of September, the BLS noted that 21,000 came from people taking jobs with temp agencies. Should the economy continue to decline, many of these jobs will disappear.
It is obvious that the US government reports are being treated by investors with much more skepticism than in times past. The mainstream media is starting to catch on, but seems to be way behind the intelligence of their viewers/listeners/readers. At least one reporter stated that the jobs report represented bad news for Democrats, who currently hold majorities in both the House of Representatives and the Senate and also the presidency, when elections come up next month.
Unfortunately, this reporter has not thought the problems all the way through. The troubles aren’t rooted with the elected Democrats or Republicans. Rather, the problems can be blamed on the people who elect such politicians and on the political system itself. The longer it takes to solve the problems instead of making them worse by punting them into the future, the further the US dollar will fall and gold and silver will rise.
Until such time as Americans realize the roots of the crises and do something about them, they are going to need gold and silver for self-protection.
Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes “Liberty’s Outlook,” a monthly newsletter covering rare coins and precious metals. Past issues can be found online at http://www.libertycoinservice.com/ Pat Heller is also the gold market commentator for Numismatic News. Past columns online at http://numismaster.com/ under “News & Articles”. His radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.