An important part of fundamental analysis is a wide range of economic indicators.. One of these is Nonfarm payrolls. Consider, what it is, how it is considered and applied in practice.
What is Nonfarm payrolls
Nonfarm payrolls is the number of new jobs in non-agricultural sectors of the economy.
The indicator reflects the employment rate in the United States by measuring the number of jobs. Report published monthly by the US Department of Labor. The calculations cover jobs from about 500 sectors of the economy. Exceptions are:
• Agriculture
• some government agencies: for example, military personnel are not counted, government-appointed officials, CIA and national security agents
• non-profit companies
When is Nonfarm payrolls data published?
The data is published every first Friday of the month in 15:30 or 16:30 MSK depending on summer / winter time shift.
Bureau of Labor Statistics (BLS) publishes other data at about the same time: the share of the labor force in the total population and the unemployment rate.
Differences in labor market data
Data collection on unemployment rate and Nonfarm Payrolls is different. The first is formed on the basis of a survey of households, and the second is based on payroll. At the same time, Nonfarm payrolls are often revised as part of the next release, and the data may be radically different from the past..
Organization of Automatic Data Processing (ADP) also keeps statistics on employed and publishes data for 2 days before the report of the Ministry of Labor. Nonfarm payrolls ADP is often called a harbinger, but it also has its own calculation methodology, different from the Ministry of Labor. Therefore, all indicators at the time of publication or after may be contradictory., what to consider.
What and how does Nonfarm payrolls affect?
Nonfarm payrolls and unemployment data are used to assess the employment situation in the country. Indicators speak about the current state of the economy and allow you to assess future economic activity.
Results affect stock market, dollar value, treasury bonds and the price of gold. In the classical sense, data is interpreted simply:
• Рост Nonfarm payrolls, that is, an increase in jobs, mean an increase in business activity in the country and has a positive effect on the stock market. The dollar is rising, and gold, vice versa, falls.
• A decrease in the indicator indicates the presence of various problems and can potentially indicate a downturn in the economy. It's negative for the dollar and stocks, but positive for gold.
• Data is compared with predicted values and actual previous.
• The indicator may be neutral, therefore, you should pay attention to the unemployment rate, and for wages, and on the general state of the economy.
This scheme does not always work., often the impact of statistics is short-term, and the further development of events depends on the general situation in the economy and the course FED.
For example, statistics in August for July 2021 G. was very positive, exceeding past significance and expectations. Gold value plummeted, dollar added in value, as well as the index S&P 500. But then the mood of the investors changed., since strong results lead to an early curtailment of QE, which is theoretically negative for the stock market. Gold started to rise, and the dollar is going down. The main US index rose, but after the statistics in September, the mood changed to negative due to the disastrous growth rates of Nonfarm payrolls. In such an environment, expectations for US economic growth have abated..
Key facts
• Labor market statistics are published on the first Friday of the month at the same time.
• Indicators speak about the current state of the economy and provide an estimate of future economic activity.
• At the time of publication, volatility may increase in the market due to the growth of speculation in various financial instruments.
• Data can provoke a rise or fall in the dollar, US stocks, indices and gold.
• Trading during the release of statistics is high-risk, and the dynamics of exchange instruments is influenced by a combination of factors: for example, unemployment and wages, Fed statements, general economic situation in the country, medium-term expected events
