Key Takeaways
- Measures monthly job changes excluding farm and military.
- Covers 80% of U.S. non-agricultural workforce.
- Released first Friday monthly, key economic indicator.
- Signals economic health and influences markets.
What is Non-Farm Payroll?
Non-Farm Payroll (NFP) measures the monthly change in the number of paid workers in U.S. industries excluding agricultural sectors, military, and private households. As a vital economic indicator, it reflects shifts in the labor market and signals overall economic health.
Released by the U.S. Bureau of Labor Statistics, NFP data covers around 80% of the workforce in goods-producing and service sectors, making it a key focus for those tracking macroeconomics.
Key Characteristics
Non-Farm Payroll reports offer detailed insights on employment trends with several notable features:
- Scope: Includes manufacturing, construction, retail, finance, and healthcare sectors but excludes farm workers and military personnel.
- Monthly changes: Reports net job additions or losses, typically ranging from +10,000 to +250,000 in stable economic periods.
- Additional metrics: Provides data on average hourly earnings, unemployment rates, and sector-specific job changes.
- Impact on markets: Influences stock, bond, and currency prices due to its role in signaling economic growth or contraction.
How It Works
The NFP report is compiled from the Establishment Survey, which samples about 131,000 businesses and 670,000 worksites monthly. This extensive dataset enables timely tracking of employment changes across diverse sectors.
Released on the first Friday of each month, the report’s figures often lead to market volatility as investors adjust expectations for central bank policies based on wage growth and job creation trends. Monitoring average earnings within the report helps you assess inflationary pressures tied to labor costs.
Examples and Use Cases
Understanding Non-Farm Payroll data aids various stakeholders in making informed decisions:
- Airlines: Companies like Delta adjust capacity and hiring based on sector employment trends.
- Investors: Those focusing on large-cap stocks may react to NFP-driven market moves, especially in cyclical industries sensitive to economic shifts.
- Job seekers: Use sector growth data to target expanding industries such as professional services or healthcare.
Important Considerations
While NFP is a powerful economic indicator, it’s essential to interpret it alongside other data points for a comprehensive view. Monthly revisions can alter previous job growth estimates, affecting market sentiment.
Additionally, seasonal adjustments and exclusion of self-employed individuals mean the report doesn't capture the entire employment landscape. Incorporating insights from bank stocks and monetary policy trends can further enhance your understanding of the economic environment.
Final Words
Non-Farm Payroll data offers a critical snapshot of U.S. economic health by tracking job growth across key sectors. Monitor upcoming reports closely to anticipate shifts in labor market trends and adjust your financial planning accordingly.
Frequently Asked Questions
Non-Farm Payroll measures the monthly change in the number of paid U.S. workers across most non-agricultural sectors, excluding farm employees, private household workers, non-profits, military personnel, and self-employed individuals. It's a key economic indicator released by the U.S. Bureau of Labor Statistics.
The NFP report includes jobs in sectors like manufacturing, construction, mining, retail, financial services, healthcare, education, leisure, and government jobs, covering about 80% of the U.S. workforce. It excludes farm workers, private household employees, non-profits, unpaid family workers, proprietors, and active military personnel.
The Non-Farm Payroll report is released monthly, typically on the first Friday at 8:30 a.m. Eastern Time, and it covers employment data from the previous month based on a reference week that includes the 12th.
NFP is a top economic indicator that reflects the health of the U.S. economy by showing job growth or decline. Strong job gains often signal economic expansion, while weak numbers can indicate a slowdown or recession, influencing policy decisions and financial markets.
Besides the headline job change, the NFP report includes the unemployment rate, sector-specific job gains or losses, average hourly earnings which indicate wage growth, private sector employment changes, data revisions, and labor force participation rate.
Because NFP reflects overall job growth and wage trends, it heavily influences investor sentiment, monetary policy expectations, and market movements. Surprising results can cause significant volatility in stock, bond, and currency markets.
NFP excludes farm workers due to seasonal employment fluctuations, private household workers, non-profit employees, unpaid family workers, proprietors, and active military personnel to focus on jobs sensitive to economic cycles and provide a clearer picture of economic trends.
The Establishment Survey collects payroll data from about 131,000 businesses to measure employment changes for NFP, while the Household Survey gathers data from households to calculate the unemployment rate. Together, they form the Employment Situation Summary for a comprehensive labor market view.
