The markets learned today that over 232.000 US jobs have vanished since the beginning of the year. If doubts remained that the economy is contracting, they were quickly dismissed by today's jobs numbers. Government and mining jobs were about the only gaining sectors in the American economy. The unemployment rate rose to 5.1% - still not as high as in the previous two recessions.
While economists rang the recession bell today, several of them also foresaw improving conditions by the final quarter of the year and reckoned that the dip will be shallow and reasonably brief. In any case, the stall in the US economy will likely spread to other parts of the world where spending will contract in the wake of this confirmed status quo. Flies on the wall at next weekend's G-7 meeting would ideally be armed with tape recorders. There will be much to learn.
Nevertheless, the positive (for metals) conditions we had alluded to earlier in the week gave sufficient cause to funds to once again do what they do best under such circumstances: sell dollars, and buy 'stuff.' Sure enough, shortly after the numbers were released, the greenback sank to under 72 briefly (climbing back just above that level later on) and crude oil rose to nearly $106.00 per barrel.
Copper, gold, silver rose in concert today, but their gains were tempered by the nagging suspicion among speculators that if the world's largest economy has most of the year to work its problems out, demand for the same 'stuff' cannot be expected to be robust.
The good news? The metal remained above $900 for a third day in a row and tested near $915 before wrapping up the week. The bad news? Gold lost more than $23.00 per ounce on the week, and remains vulnerable to further bouts of profit-taking and attempts to test lower support levels. Silver gained 34 cents to $17.67 and platinum added $27 to $2013 per ounce. Palladium climbed by $4 to $443 per ounce. All of the above were levels as of 14:20 Eastern time.
The March jobs figure showed 80,000 positions lost, which was higher than the expected 60,000 level and it confirmed Ben Bernanke's pessimistic tone during congressional testimony earlier this week. Investors and Wall Street now await to see what measures the US central bank will take to ease the pain. They are being told that the Fed has more available tools in its bag of tricks in addition to the probable quarter point cut it might offer next. Speculative buyers are also increasingly of the opinion that rate cuts will likely come to an end after the next one (perhaps two) and that their magnitude will revert back to the token quarter-point adjustments of the past.
While many men and women are now out of work, others have been hard at work trying to either explain or fix the situation so that the country can get back to business. For example, one of the more far-fetched scenarios emerged in the wake of the testimony to the Senate Banking Committee by NY Fed President Geithner the other day. Contrary to popular wisdom which reckons that taxpayers may get stuck with a bill of anywhere from $2 to $29 billion dollars for this rescue, the possibility was raised that the deal could actually make the government some money. In effect, Mr. Geithner said that if Bear assets are worth more than $30 billion (which now looks more and more likely) then the government would pocket the profits.
The day's proceedings also revealed that the Bear rescue was carried out in the interest of the greater good, that moral hazard issues took a back seat to systemic meltdown hazard, and that the investment banking firm may have gone under due to a combination of unfounded rumors that were being spread about its state of health, and a Fed that opened the discount window to others just one week too late. Officials cautioned that they viewed such acts as the spreading of rumors and shorting of shares following them, with a very serious eye. Some day, when the Bear saga is fully known and dissected, a different story than the one we thought we knew will emerge. Kind of like how close the world came to Armageddon during the Cuban missile crisis.
A calmer week would be welcome ahead of the G-7 meeting. However, the statistical flows will now focus on the consumer side of the equation (retail sales, consumer confidence, mortgage applications) and is expected to round out the recession picture that is now coming into sharp focus on every TV newscast and in every newspaper out there. With that in mind, volatility will remain very much in the picture in commodities.