Cici's Teaching Notes📒 Important U.S. Economic Data - Non-Farm Payrolls

It is important to understand the macro-economic data to trade U.S. stocks. Cici will share the important U.S. economic data with you through this section for detailed interpretation. I hope you can understand what these data represent in depth.

Today's article is about to explain the non-farm payrolls data

Non-farm payrolls reflect the number of new jobs outside of agricultural employment.

- Release time: The first Friday of every month before the market at 8:30 EST (daylight saving time)

- What's the impact: Non-farm payrolls data is an important basis for the Federal Reserve to measure the country's economy and adjust monetary policy. It may trigger dramatic fluctuations in the movements of the dollar, U.S. stocks, U.S. bonds and gold.

- How to judge: MoM and YoY (will be published together with the data), expected value (can be found on major financial websites)

- Related data: ADP employment data is called "small non-farm payrolls", the statistics are private sector non-farm payrolls data, which has a foreshadowing effect on the non-farm payrolls.

Here are the concepts of non-farm payrolls data to learn. Just click the picture below.

Non-farm employment data excludes farm employees, owners, private household employees, unpaid volunteers, and unincorporated self-employed persons. The exclusion of agricultural employment is due to the difficulty of collecting and counting data on agricultural employment given the industry structure and employee characteristics of agriculture.

A variety of complex employee situations exist in agriculture, such as self-employment, employment by unpaid family members, hobby practice or agriculture as a hobbyist, other cooperative production relationships, etc. At the same time, the seasonal fluctuation of agricultural employees is quite large, and the employees vary greatly depending on the product and the region.

Also, the U.S. Bureau of Labor Statistics (BLS) employment status survey uses unemployment insurance records and therefore does not include workers not covered by unemployment insurance. Because many U.S. agricultural workers are excluded by unemployment insurance, the sample size is insufficient to calculate accurate estimates. Even with the exclusion of many employed people, the non-farm payrolls data cover 80 percent of the U.S. economy in terms of GDP, according to the BLS.

Non-farm payrolls are included in the U.S. Bureau of Labor Statistics' Employment Situation Report. The report also releases the results of two surveys: one is the household survey, which mainly includes the unemployment rate and labor force participation rate, and the other is the business survey, which mainly includes the number of non-farm payrolls, hours worked, and hourly earnings.

Among all the data, the number of non-farm payrolls and the unemployment rate are the data of most interest to the market. In addition, many analysts focus on changes in employment numbers in various sectors of the economy to determine which sectors are expanding and which are contracting. The average hourly earnings number is also one of the data that the market pays attention to.

The data can not only reflect the hot and cold job market, but also to judge the situation of inflation. The data was ignored by economists during the epidemic because employees were mainly from high paying jobs or industries during the period. But with more service sector employees such as hotels and restaurants now returning, the figure becomes important to determine whether wage pressures are rising and further can affect inflation.

Because the non-farm payrolls are likely to be revised more sharply in the next period, the data is not particularly predictive of the economy and is taken more as a signal to confirm current economic conditions. Secondly, because of the unexpectedly large swings in non-farm payrolls between consecutive months, it is also much less predictable. For example, in a post-recession period, job creation has been lower than market expectations, and then suddenly a month of sharp increases in employment several times market expectations, when people therefore speculate that the Fed is about to tighten monetary policy, the next month there may be a very poor non-farm payrolls data, leaving the market at a loss.

In this case, the non-farm payrolls data may not be a good predictor of the stage the economy is in, but the data is still an important economic signal if there are large swings beyond expectations.

In addition, the two surveys in the employment report reflect different dimensions of the employed population. The Household Survey interviews 60,000 households, while the Business Survey collects data from 145,000 businesses and government agencies covering 697,000 workplaces, or about one-third of all salaried workers. The household survey includes a wide range of employment, including self-employed, agricultural workers, and more. The business survey covers only employees of companies that pay wages. So although the business survey has a larger sample, it ignores some work groups and the representativeness of the business survey is questioned. However, household surveys are often criticized because of their small sample size.

The above is the sharing of non-farm data, do you know more about it? Welcome to share in the comment section.🤗 🥰