One of the most important monthly economic data points in a trader’s diary is the release of U.S. Non-Farm Payroll Report. This figure carries great significance for traders as it gives an indication of job growth in the United States.

Start by looking at previous headline changes in U.S. Non-Farm Payroll. Traders will look at how the actual figure came out when compared to the median estimate and the high and low ranges; this is also useful when looking at the unemployment rate.

Other data to watch in the run up to non-farm payroll may include:

  • Weekly jobless data
  • ADP employment changes
  • Employment constituents of the monthly ISM and PMI data

With a few exceptions due to market holidays, non-farm payroll data hits the newswires at 8:30 a.m. Eastern Time on the first Friday of every month.

Reading the Report

The report itself is extremely large so most traders look for three or four key pieces of information.

Traders will focus on the headline figure first and foremost. When the actual number is released the market will move according to whether more or less jobs have been created, compared to expectations.

Given the scale and complexity of data, the Non-Farm Payroll Report is often subject to large revisions of the previous month’s headline. The Bureau of Labor Statistics also revises the month prior to the previous, known as the two-month net revision.

Another important data point is the unemployment rate, which is the percentage of the total labor force that is unemployed but actively seeking work. The figure moves in relatively small increments compared to the headline reading and movements as small as 0.2% in either direction can often be viewed as a large change.

Large fluctuations in wage inflation are often factored into the Federal Reserve’s decision-making; and the number of hours worked in the report period may also be monitored for changes or irregularities.

There are a number of factors to think about when trading U.S. Non-Farm Payroll Report, but with a little insight and thorough preparation it is an event that offers numerous opportunities for traders.

 

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