Tomorrow’s Jobs Report Might Reveal an Unexpected Outcome

What If NFP Forecasts Are Wrong?

In January analysts were forecasting that additional new jobs added in December would come in at approximately 187,000. More so they were forecasting that the unemployment rate would come in at 3.6%. This was one of the greatest missteps by the economic forecast in terms of the magnitude of their misjudgment and underestimation of the actual numbers.

The fact of the matter is it is not uncommon for the economic forecast to come close to the actual numbers. However, in the case of last month’s jobs report they underestimated it by 63%. While it is highly unlikely that their estimates will contain such an over or under-estimate as we saw last month it is very common for the actual numbers to be quite different than the estimates.

That being said, some analysts have been predicting that the forecast of an additional 200,000 to 225,000 new jobs being added last month will come in well below the actual numbers. My question is what if these analysts are wrong and the actual numbers come in below estimates? Current data is looking for the unemployment rate to rise from 3.4% in January to 3.5% in February.

Recent data from the BLS release yesterday revealed that there are signs of softening in the labor market. There have been many sectors including the tech sector that have begun a massive program of layoffs which would continue to make the labor market tight but result in fewer new jobs being added.

How Could Gold React?

If that’s the case we could expect to see tailwinds from that report be extremely bullish for gold and take prices substantially higher initially above $1850 on the day the report is released, if the actual numbers come in below expectations. This is because a tepid jobs report coming in under expectation would not give the Federal Reserve the data necessary to justify ½ a percent rate hike at the next FOMC meeting.

Gold vs US Dollar Today

As of 5:25 PM EST gold futures basis, the most active April contract is up $ $16.40 and fixed at $1835. This is the result of dollar weakness contributing approximately 1/3 of those gains with the remaining gains directly attributable to market participants bidding the precious yellow metal higher.

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Wishing you as always good trading,

Gary S. Wagner