U.S. Jobs Report May Support Dollar and Pressure Gold

Posted by Fullerton Markets on April 5, 2021 at 2:50 PM

U.S. employers added the most jobs in seven months with improvement across most industries in March, as more vaccinations and fewer business restrictions supercharged the labour market recovery. This may support dollar and put some downward pressure on gold.

Nonfarm payrolls increased by 916,000 last month and February employment was revised up to a 468,000 gain, according to a Labour Department report Friday. The median estimate was a 660,000 rise. The unemployment rate fell to 6%. Rising Covid-19 infections had severely restrained the labour market for months, but now more than two million Americans are getting vaccinated daily and economic activity is picking up. This also helps explain why the workforce participation rate edged up in March.

What’s more, businesses have a clearer view of potential demand as a wave of stimulus-supported consumer spending is poised to wash over the nation’s service providers. Local and state government education employment increased by about 126,000, reflecting the return of more in-person learning at schools.

The end of the pandemic appears to be in sight as vaccine distribution accelerates, the nation may be looking at a bright summer with monthly gains of over a million jobs, getting the number much closer to pre-pandemic employment. While stronger sales and daily progress in the fight against the coronavirus will help bring the labour market closer to its pre-pandemic employment levels, a full recovery will take time.

The payroll figures showed broad-based gains across industries, led by a 280,000 surge in leisure and hospitality. Construction payrolls jumped 110,000 after dipping in February amid severe winter weather. Education employment also climbed as more schools reopened. Manufacturing employment increased by 53,000 last month, the biggest advance since September.

U.S. Treasury yields received a bump higher following the report, with the 10-year rate climbing as high as 1.69%, although it remained within around 2 basis points of its prior day close. U.S. stocks are closed Friday for a holiday.

Fed’s stance

The USD1.9 trillion stimulus package signed last month by President Joe Biden should give an additional shot of adrenaline to hiring amid renewed support for businesses and individuals.

Federal Reserve Chair Jerome Powell has pledged the central bank will continue to support the economy with accommodative monetary policy, despite the recent uptrend in economic and employment data. Even with the sharp advance in March, payrolls remained 8.4 million below the pre-pandemic peak of about 152.5 million.

“The recovery is far from complete.” Powell said at the House Financial Services Committee hearing recently. He also commented that the path of the economy continues to depend on the course of the virus.