THE REBOUND HAS STALLED – Gold Is Positioning Itself to Take Off

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by James Corbett, The International Forecaster:

Don’t look now, but the economic recovery, rebound or whatever you want to call it has stalled.

It’s not exactly drowning in quicksand (at least not yet), but it’s definitely mired in pools of thickening sludge.

The U.S. reported disappointing job growth for the second straight month and for the third time in six months.

Just 194,000 nonfarm jobs were added to what has got to be characterized as an restless economy in September — a significantly slower pace than the 366,000 number a month earlier.

Economists had been expecting to reach at least 500,000 this time around.

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Don’t look now, but the economic recovery, rebound or whatever you want to call it has stalled.

It’s not exactly drowning in quicksand (at least not yet), but it’s definitely mired in pools of thickening sludge.

The U.S. reported disappointing job growth for the second straight month and for the third time in six months.

Just 194,000 nonfarm jobs were added to what has got to be characterized as an restless economy in September — a significantly slower pace than the 366,000 number a month earlier.

Economists had been expecting to reach at least 500,000 this time around.

The question is, Is that restlessness the kind that goes hand in hand with a yearning — a longing, say, for something better, or is it like the omen you feel right before an F5 tornado hits?

First, the silver linings (and there are just a few)…

The government’s overall, headline U-3 unemployment rate dropped 0.4 percentage points to 4.8%, from 5.2%.

Unemployment for Black Americans dropped by even more — to 7.9% from 8.8% (the buts are below).

Overall, private-sector employment growth was modest in September. But professional and business services added 60,000 jobs. Retail trade added 56,000, and transportation and warehousing were up 47,000.

Plus, with delta variant infections appearing to have leveled off, economists believe we’ll see a solid upswing in jobs heading into the holiday season.

And average hourly earnings of employees on private, nonfarm payrolls rose by 19¢ to $30.85 in September — reflecting an annualized increase of 4.6%.

But…

The actual seasonally-adjusted unemployment rate for all Americans is 8.5% (the government’s U-6 rate) when you include discouraged workers and those working part-time for economic reasons.

There are still 4.5 million Americans working part-time because they can’t find a full-time job and 6.0 million who aren’t counted as part of the labor force who currently want a job; that’s 10.5 million total.

The labor force participation rate of Black Americans fell to 61.3% in September from 61.6% in August. That rate, which dropped by 0.1% for White workers, also rose for Hispanic and Asian workers.

Analysts say the shrinking Black labor force suggests that the improved unemployment picture for Black Americans can be attributed, at least partially, to discouraged job hunters leaving the labor force — not an indication of longer-term recovery.

School districts lost 144,000 jobs in September — they simply didn’t add the number of teachers at the beginning of the academic year they normally do.

September’s jobs report also showed labor market recovery among women lagging behind men, a trend we’ve seen throughout the pandemic, as more women left the workforce to care for their children and elderly parents.

In fact, when measured by total employment compared to pre-pandemic levels in February 2020, women lag behind men across all racial groups.

That phenomenon will no doubt continue, as women tend to stay out of the workforce longer than men — mainly because of their primary caregiver status.

Bars and restaurants saw essentially no growth, repeating their weak showing in August. The hospital industry had been driving the recovery this year, with an average gain of 197,000 jobs per month from January through July.

Economist Justin Wolfers warns, “We’re missing about 8 million jobs, and at this rate, we’re not bringing them back any time soon.”

After two successive months of underperforming, even dismal job growth, economists are now looking to the October jobs report to show what the economy is capable of as the Delta variant goes into hibernation.

But the lower headline unemployment rate can and should be seen as a warning that not a lot of Americans are still looking for work.

And it’s hard to add jobs if no one particularly wants to come out of unemployment to fill them.

No wonder all the pundits’ GDP forecasts continue to be revised substantially downward as we get closer to the end of another crazy year.

The Gold Market Looks Opportunistic

But don’t fret! The World Gold Council’s latest weekly gold market report tells us a number of reasons why the upcoming months could be a good time for gold. Among them are these:

  • Gold demand is rising in China, with trading volumes there up 32% in September, and in India, where increasing demand is being supported by the annual wedding season;
  • Historically, gold performs best during recessions and periods of stagflation, boosted by elevated risk, equity market weakness, low real interest rates and a weak U.S. dollar.
  • Gold outperforms its long-term average during periods of negative interest rate environments (10.8% real return);
  • Gold tends to increase in periods of systemic risk. Despite the rally in equities since March 2020, valuations have reached unrealistic levels, suggesting the potential of a major correction.
  • Gold’s negative correlation to stock and other risk assets increases when they sell off.

So, despite some short-term challenges (such as the Fed’s presumed tapering of its bond buying in the coming months), which will produce continuing price volatility, make sure you’re well-diversified with plenty of gold and silver so you’re prepared for the long term.

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