Silver spot price: All eyes on US Employment report

on Jan 10, 2014
Updated: Oct 21, 2019

**, Friday 10 January:**

The spot price of silver has gained made marginal gains today in choppy trading, lacking clear direction ahead of the release of December’s US employment report, which is often the biggest market mover of any economic data on the calendar.
The Bureau of Labor Statistics will reveal the official US jobless rate and payroll growth for last month at 13.30 UTC.

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The market expects the US Non-farm employment to show a robust gain of 200,000 new payrolls in December, after US economic data has been decisively bullish at the end of the 2013. The initial estimate for November showed job creation of 203,000.
The US unemployment rate is widely anticipated to stay unchanged at November’s 5-year low of 7.0, half a percent above the Fed’s 6.5 percent no-rate-hike threshold.

Following this week’s release of stronger-than-expected ADP Non-farm payrolls, Deutsche Bank (DB) raised its forecast for the official nonfarm payrolls to 250,000 from 225,000, which would put the US jobless rate at 6.8, according to the bank’s estimates. This makes DB’s chief US economist Joseph LaVorgna the most bullish forecaster from all the analysts polled by Bloomberg.

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LaVorgna points to the bank’s employment scorecard (see table above), showing that “there was really only one component which materially weakened last month – Chicago PMI employment”. He adds that “we are dismissing the signals from both initial and continuing jobless claims, because both series displayed erratic behavior throughout December.”

However, analysts at Scotiabank warn clients not to extrapolate ADP’s robust payroll gain, despite the strong positive correlation between the two reports.

“We still stress that ADP can offer many headfakes in terms of nonfarm expectations as the first pass at ADP private payrolls and nonfarm private payrolls still track each other poorly even post-ADP methodological revisions.” Scotiabank highlights that on average “the first prints have had ADP private payrolls missing the nonfarm private payrolls print by about 40,000 per month in absolute terms since the October 2012 ADP methodological revisions”.
The Canadian bank estimates that today’s official US employment report will show job growth of 195,000 in December, which is marginally below the market consensus. However, Scotiabank’ economists share the prevalent view that the US unemployment rate will hold steady at 7.0 percent.
Right now, silver is trading at around 19.748, up 0.33 percent intraday.
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