Does Jobs Data Mean The Economy Is Coming Up Roses?

Last week's release of the November unemployment rate on the surface may appear that the economy is coming up roses.

The news: The U.S. economy added 178,000 jobs in November, while the unemployment rate fell to 4.6% - the lowest reading in more than nine years.

Digging deeper into the details of the report, there are some trends emerging that warn of potential black clouds looming on the horizon for the economy.

Here are 4 key trends seen inside the details of the latest report:

  1. The unemployment rate fell primarily because people left the workforce.
  2. The trend in job growth is slowing.
  3. Wage growth slipped in November.
  4. Inflation is eating up a larger portion of consumer's take home pay.

Here's what you really need to know. The latest report revealed that about 200,000 people left the workforce, or simply gave up looking for jobs, which contributed to the sharp drop in the overall unemployment rate.

The hiring trend is slowing. Job growth averaged 180,000 per month this year. However, notably, over the last three months, it has averaged 176,000 jobs, compared with an average of 223,000 between June and August.

Also, according to the November employment report, retailers hired fewer seasonal workers in October and November 2016 than they did the last few years.

The slowdown in wages is a worrisome economic story. How much consumers take home each month matters for spending power. The good news of 178,000 new jobs created was offset by the average hourly earnings number which showed a drop of .1% month over month. Average hourly earnings fell 3 cents in the month, marking the first decline since December of last year.

Rising inflation, including higher gasoline prices are eating up a larger portion of their take-home pay.

What Does This Mean For Precious Metals?

Gold prices leapt to a higher close on Friday in the wake of the U.S. employment news. The Federal Reserve is widely expected to hike interest rates at its December meeting. But at this late point in the economic cycle, the odds suggest that the central bank will be unable to normalize its interest rate before the next recession hits. That leaves open the door to negative interest rates here in the U.S. just like they have in Europe and Japan. That is gold bullish over the longer-term.

Gold suffered a setback in a risk-off trade immediately following the election. The stock market may well have gotten ahead of itself by pricing in a lot of 'good news' for the economy that will have to come to fruition in 2017.

The recent pullback in gold prices offers long-term goldand silver investors an attractive buying opportunity.

Both the stock market and the current economic expansion phase are long in the tooth on a historical basis and cycles are poised to turn in 2017.

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About Blanchard

We are the premier tangible asset advisor in the United States for serious investors and collectors. We have a long history of providing individuals investors with consultation and investment guidance to help protect and build their hard-earning wealth. We believe that gold and silver bullion ownership is appropriate for all investors as a proven portfolio hedge. Metals are a non-correlated asset to stocks, which means when stocks fallmetals increase in value.