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Non-farm payroll estimates are very bullish.

Wednesday’s strong ADP data, which showed that private sector employees added 220,000 jobs in April, has given additional impetus to the optimists in respect of Friday’s non-farm payrolls.

Expectations are that the unemployment rate will decline from 6.7% to 6.6%, while the median consensus payrolls estimate lies at 215,000. This is its highest median estimate so far in 2014, and tends to give credence to the feeling that the US economy is improving as well as lending support to the recent decision by the Federal Reserve to reduce its stimulus.

The tiny snag is that first-quarter growth amounted to a mere 0.1% rise against expectations, for an increase of 1.2%. Net exports and investment was a big drag on the gross domestic product. The Chicago purchasing managers index number helped to negate the weak historical number, by rising at its fastest pace in six months. Rising demand for durable goods has helped to drive gains in manufacturing.

Buoyed with optimism, the Federal Open Market Committee went ahead with its linear tapering, reducing asset purchases by an additional $10bn per month, clearly feeling that the winter weather should be given all of the blame for this weak GDP number, and that Q2 will no doubt be better.

It’s therefore quite important that this month’s payroll number is a good one. Markets participants will want to see the expectation at least met, given that it will be touted as a sign that Q1 was an outlier in the overall US growth story.

Non-farm payrolls since January 2014
 

 

Estimate

Actual

Revision

Highest estimate

Lowest estimate

Estimate range

10 Jan 197,000 74,000 84,000 250,000 100,000 150,000
7 Feb 180,000 113,000 114,000 270,000 105,000 165,000
7 Mar 149,000 175,000 197,000 220,000 100,000 120,000
4 Apr 200,000 192,000   275,000 150,000 125,000
2 May 215,000     250,000 175,000 75,000

 

The estimated range is certainly the tightest this year so far, if not ever, with the lowest estimate coming in at 175,000. This is some 30,000 higher than the average number of jobs added in the US this year.

The top end estimate is 250,000 – the last time we saw a number like that was in March 2013. 

It’s often said that gold gives the clue to the number. The dearth of inflation and the fact that the Fed has been reducing stimulus has not been kind to gold prices. Even the geopolitical tensions have failed to put much of a floor under the precious metal.

In a downtrend since it’s mid-March highs, just shy of $1400 per ounce, gold has fallen 7.65% in the last six weeks. It would seem that at this point, gold is expecting a good number. Support lies at $1270 and we would need to see a clear break through $1330 if the trend is to be negated.

 

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