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What Is Nonfarm Payroll?

Views 2732022.08.03
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Key takeaways

● Nonfarm payrolls (NFP) measures the number of US workers excluding farm workers, private household employees, unincorporated business owners, etc. It represents the vast majority of the US workforce.

● Different from nonfarm payrolls, the ADP employment data only tracks levels of nonfarm employment in the US private sector and has a predictive effect on the former.

● The Employment Report provides insights that have a direct impact on the economy as well as the stock market, the value of the dollar, the value of Treasuries, the price of oil, and the price of gold.

Understanding nonfarm payrolls

Released by the US Bureau of Labor Statistics (BLS) in the monthly Employment Report, nonfarm payrolls is the measure of the number of US workers excluding farm workers and some government workers, as well as private household employees, unincorporated business owners, and nonprofit employees. It represents the vast majority of the US labor force.

Besides nonfarm payrolls, the data on nonfarm private employment released by Automatic Data Processing (ADP), often on the first Wednesday of each month, is a useful reference and has a certain predictive effect on the former.

Why nonfarm payrolls is important

Nonfarm payrolls data generally refers to the indicators of US nonfarm employment, including the number of people on nonfarm payrolls and the nonfarm employment and unemployment rates.

The data is an important basis for the Federal Reserve to assess the state of the US economy and accordingly adjust monetary policy.

The impact of the employment report

The BLS releases the Employment Report often on the first Friday of each month.

This Employment Report, which includes the latest employment-related information, is based on two separate surveys, the Establishment Survey and the Household Survey.

Information about nonfarm payrolls, together with that about average hourly earnings and hours worked, is produced by the Establishment Survey. As for the Household Survey, it gives details on the labor force and the employment and unemployment rates.

To compile the Employment Report, economists and policymakers use all data available to assess current economic conditions and forecast levels of future economic activity.

The report contains the most sensitive monthly economic indicators for investors to refer to. It also presents many valuable insights into the US labor force which have a direct impact on the economy as well as the stock market, the value of the dollar, the value of Treasuries, the price of oil, and the price of gold, among others.

In addition, the Employment Report also shows which sectors are expanding and contracting. While expanding sectors contribute more new jobs, shrinking sectors see a decline in jobs.

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