Non-farm payroll report and its importance in Forex market

Mohammed Abdelkhalik
November 21, 2020

Ad Disclosure

Article of forex trading education: Non-farm payrolls and forex trading

Why are the non-farm payrolls important in forex?

What is the nonfarm payroll (NFP) indicator?

The U.S. non-farm payroll (NFP) indicator measures the change in the total number of jobs in business sectors. The exception of government jobs in general, private family jobs, and jobs in non-profit institutions that assist individuals and workers in agriculture. The jobs index is preceded by the consumer spending index, which shows the performance of the economic activity.

Although jobs showed significant growth in 2012, the situation was not the same in 2011. Therefore, the financial markets are sensitive to the non-farm employment report. And severe fluctuations may occur in response to the release of the non-agricultural employment report.

While the added or missing number of jobs is considered as a clear indicator of the current economic situation, there is much other information in the non-agricultural employment report that has the potential to influence market trends.

The employment rate in the NFP

Employment data is the main monthly indicator that measures economic activity; As it includes all major economic sectors. This and many other economic indicators depend on his data.

The index data reflects labour market performance, as well as incomes and production. In short, its data gives indications regarding other indicators that will be released throughout the month; It also plays a big role in influencing the psychological aspect of the money markets during the month.

Employment data provide the most detailed and accurate report on how many people are looking for jobs, how many people have actually got jobs, what salaries they get, and how many hours they work. This data is the best way to gauge the current state and future direction of the economy. It is worth noting that the rate of change in employment in the non-agricultural sector is classified according to the sectors. This helps investors determine the economic sectors in which they will invest.

Chart of DYX Rage on NonFarm Payroll Day

It determines the change in the level of those hired during the last month. Except for those who were hired in the agricultural sector. This indicator is published two days before the publication of the ADP Employment Report on the official office of human resource statistics which provides solutions in the field of employment for companies. Since its release in 2007, it has proven to be a good predictor of the BLS report.

Nonfarm report and economy

The report provides a percentage of unemployment in the workforce. Traders consider it as the most important part of the report because of knowing the percentage of unemployed citizens. We can give an accurate description of the economic situation. This rate is monitored by the Federal Reserve, which can change the rate of inflation and the cost of commodities by printing more money.

The work sectors are different and many, and they are divided into the report. The report refers to the sectors that added jobs and the sectors that lost jobs. This data, of course, gives traders a general idea of ​​which sectors are growing and which sectors will decline.

Forex traders are also interested in the details of average hourly earnings. Because if more people were employed but were getting less per hour. Of course, indicates that several jobs have been cut from this sector. If the average hourly wage increases, this has the same effect as if there were more jobs added to this sector.

The report also includes reviews of the non-farm employment report for the past month. These reviews allow traders to guess the rate of growth and trade on the basis.

Given the extreme market volatility caused by the non-farm payroll report. Many traders choose not to trade during the times this report is issued. However, whoever can analyze this information and anticipate its effects on the market can achieve great profits by trading based on this information.

United States Non-Farm Employment Report

The Non-Farm Jobs Report, often referred to by traders as NFP, is a report that provides details on private employment statistics in the U.S. Excluding agricultural workers, nonprofit workers, and domestic workers. And the report on jobs in the non-agricultural sector is a very accurate indicator issued by the US Labor Department on the first Friday of every month. It officially includes the monthly jobs report, which affects the stock market, the Forex market, and the US dollar.

Author Mohammed Abdelkhalik

Professional Trader and Analyst, economist in Financial and Forex market since 2004.holds an MBA from the American University in Egypt. Mohammed works as an economic writer and technical & fundamental analyst for many international Forex and financial trading companies in both English and Arabic on a daily basis.