Learn of Today: Why is Non-Farm Data So Important? Have a Look at This Article.

"Non-farm data" is a common term in various analyses, but what exactly is "non-farm"? And why does this data have such an impact on the market?

"Non-farm" refers to employment-related data that excludes agricultural sectors, individual proprietors, and non-profit employees. It can basically reflect the actual employment and economic situation of the United States.

The US Bureau of Labor Statistics releases the NFP report on the first Friday of each month at 8:30 am ET.

The National Bureau of Economic Research (NBER) defines a recession as a period where economic activities like industrial production, nonfarm payroll employment, and real personal consumption expenditures slow down for several months. Thus, the monthly non-farm employment data becomes one of the most important indicators for determining economic cycles.

Non-farm employment data is highly correlated with economic performance. A positive change in non-farm data indicates a positive change in the economy.

Nonfarm payrolls include 80% of the number of workers in the U.S. and an increase in non-farm employment means businesses are expanding production and willing to hire more workers. These new hires will have more money to spend and consume. As US economic growth is driven mainly by domestic demand, with consumer spending comprising 70% of GDP, an increase in consumer spending means an overall improvement in the US economy. Therefore, non-farm data is a crucial indicator for predicting economic growth and CPI levels.

Differences between expected and actual non-farm data values can reflect whether the market's understanding of the US economy and labor market is consistent.

If the actual value is higher than the expected value, it means the market generally underestimates the health of the US labor market. This could cause stocks and currency markets to rise, while commodity prices may increase.

Conversely, if the actual value is lower than the expected value, it means the market generally overestimates the health of the US labor market. This could cause stocks and currency markets to fall, and commodity prices to decrease.

Additionally, if the actual value is the same as the expected value, it indicates that the market understands the US economy and labor market accurately, and there may be little market volatility.