Nonfarm payrolls – NFP

Non Farm Payrolls NFP

Nonfarm payrolls is a report from the U.S. Department of Labor released every month, that measures the number of jobs created in the country excluding farm workers. The NFP report is significant for the global markets as it is a leading indicator of the U.S. economy. Almost all financial assets are affected by the NFP but mostly the US dollar (USD), stocks, bonds and gold (XAU).

When Does the Nonfarm Payroll Report Released?

The U.S. Department of Labor releases preliminary data on the first Friday of the month at 1:30 p.m. GMT. The Nonfarm payrolls (NFP) report is part of the Employment Situation Report by the U.S. Bureau of Labor Statistics. The Nonfarm payrolls report include also the unemployment rate, detail on sectors, the average hourly earnings and revisions of previous reports.

Nonfarm payrolls account for 80% of all workers who contribute to the United States GDP. The report above the farm workers also excludes the employees of non-profit organizations, private household employees and unincorporated self-employed workers.

The Nonfarm payrolls (NFP) report is a survey of 450,000 businesses and 60,000 homes and is updated every month. The Nonfarm Payrolls report, with the Unemployment Rate, Average Weekly Hours, and Average Hourly Earnings reports, provides insights about the inflation and where interest rates are heading in the future.

The NFP number is the change in nonfarm payrolls of current month compared to the previous month. That figure shows the jobs created or lost in the economy during the month, except jobs that relate to the farming industry.

Nonfarm payrolls (NFP) and USD

The difference between the analyst’s estimates and the actual NFP data reported will impact the direction of the USD. The US dollar will rise if the NFP report is above expectations. If the number comes out worse than the analyst’s estimates, USD will probably drop, while the gold price most likely will appreciate. When the NFP figure is above the expectations, means that the economy is strong as the companies are growing and increasing hiring which boosts consumption as more people have more money to spend.  

On the other hand, when the NFP figure drops, more people are losing their jobs and their incomes, resulting in lower spending.

Financial markets follow closely the release and move very fast after the NFP announcement when the data are above or below the expectations.

NFP report can give a good insight into upcoming important data reports such as gross domestic product data and manufacturing figures as the more people are employed the more will be the GDP outcome.

Nonfarm payroll data are closely monitored by the Central Bank, as they present how quickly the U.S. economy and inflationary pressures are growing; fast rates of job creation leading to an increase in inflation.

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