Today’s release of the US Nonfarm payrolls report was another disappointment. Only 559K jobs were created during May, around 100K short of the 650K expectations.
Adding the horrific disappointment of around 800K jobs from the previous release (actual 266K vs. 1 million expected), we arrive at an average of 412K jobs created in the past two months. This is a much slower and much weaker
recovery than what the Fed wants!
In the meantime, average hourly earnings (also known as wage inflation) again surprised higher at 2.0% y/y, versus 1.6% expected. These numbers are again feeding into the “inflation scare” and the stagflation story,
ultimately hurting the dollar as US real yields plunge while precious metals move higher.
The next CPI inflation report is due next Thursday. Consensus forecasts expect a 4.6% y/y rise in inflation. But, should these numbers again surprise to the upside (we could already be talking 5%+ inflation), then a further
plunge in US yields should press the dollar. Gold should stay supported in the meantime, with 1900 looking like the immediate next figure that will be captured.
A move toward 1950 looks very probable in the following two weeks during the Fed blackout period ahead of their meeting on June 16.