Two markers of the job market clocked in today, and it looks like the Fed will be continuing their easy-money policies for a little while longer.
The employment report calculated by Automatic Data Processing Inc. and Moody’s Analytics found that private-sector U.S. jobs increased by 188,000 in June, as reported by the Wall Street Journal.
The Labor Department also released a report reinforcing the trend. The number of workers applying for first-time unemployment benefits decreased by 5,000 in the week ending June 29, indicating that new layoffs have dropped slightly.
We reported on June 20 that U.S. Fed Chairman Ben Bernanke plans to continue current buying practices until unemployment fell below 6.5 percent. While the job market shows growth, it is predicted to slip down only to 7.5 percent from May’s 7.6 percent–a tiny improvement that shouldn’t affect Fed policies in the short-term, so short-term interest rates will remain around zero.
With optimism surrounding the economy, interest rates may continue to rise, and we all know gold reacts to interest rate moves. Gold also has a strong negative correlation with the U.S. dollar, which should ultimately benefit from this tapered stimulus plan. At the same time, with a weak global economy and the possibility of continued crises in Europe and elsewhere in the emerging world, gold could again become the safe haven risk asset of choice.
Does the falling jobless rate change your opinion on the FOMC’s economic forecast? Is this just the beginning of a pullback on QE?
Let us know in the comments below or on Facebook and Twitter.
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