chart of historical values of NFP since 1998

Nonfarm payroll employment is an influential statistic and economic indicator released monthly by the United States Department of Labor as part of a comprehensive report on the state of the labor market.

It is a compiled name for goods-producing, construction and manufacturing companies. The Bureau of Labor Statistics releases preliminary data at 8:30 a.m. Eastern Time on the third Friday after the conclusion the week which included the 12th of the month. Nonfarm payroll is included in the monthly Employment Situation or informally the jobs report and affects the US dollar, the bond market and the stock market.

The figure released is the change in nonfarm payrolls (NFP), compared to the previous month, and is usually between +10,000 and +250,000 during non-recessional times. The NFP number is meant to represent the number of jobs added or lost in the economy over the last month, not including jobs relating to the farming industry. The farming industry is not included because of its seasonal hiring which would distort the number around harvest times (as farms add workers and then release them after the harvest is complete).

[edit] Interpretation for the Economy

In general, increases in employment means both that businesses are hiring which means they are growing and that those newly employed people have money to spend on goods and services, further fueling growth. The opposite of this is true for decreases in employment.

[edit] Interpretation for the Financial Markets

While the overall number of jobs added or lost in the economy is obviously an important current indicator of what the economic situation is, the report also includes several other pieces of data that can move financial markets:

1. What the unemployment rate is in the economy as a percentage of the overall workforce. This is an important part of the report as the amount of people out of work is a good indication of the overall health of the economy, and this is a number that is watched by the Fed as when it becomes too low (generally anything below 5%) inflation is expected to start to creep up as businesses have to pay up to hire good workers and increase prices as a result.

2. What sectors the increase or decrease in jobs came from. This can give traders a heads up on which sectors of the economy may be primed for growth as companies in those sectors such as housing add jobs.

3. Average hourly earnings. This is an important component because if the same number of people are employed but are earning more or less money for that work, this has basically the same effect as if people had been added or subtracted from the labor force.

4. Revisions of previous nonfarm payrolls releases. An important component of the report which can move markets as traders re-price growth expectations based on the revision to the previous number.

[edit] See also

• Economic indicator
• Gross domestic product

[edit] External links

• BLS: Employment, Hours, and Earnings from the Current Employment Statistics survey
• InformedTrades: Trading the News - Non Farm Payrolls (NFP's)
• RealMoney.com: Trading Nonfarm Payroll Charts