Non-Farm Payroll (NFP) is one of the most significant economic indicators for the US economy. It is a monthly report that tracks the number of jobs created or lost in the US economy, excluding agricultural, government, and nonprofit jobs. This report is closely watched by traders, investors, and policymakers, as it provides valuable insights into the health of the US labor market and the overall economy.
If you are a trader or investor, understanding NFP is crucial, as it can have a significant impact on the financial markets. In this article, we will explain what NFP is, how it is calculated, and how it affects the market.
What is NFP?
The NFP report is published by the Bureau of Labor Statistics (BLS) on the first Friday of each month. It is based on data collected from a survey of businesses and households, and it provides information on the number of jobs created or lost in the previous month. The report includes data on the total number of non-farm jobs, the unemployment rate, and average hourly earnings.
How is NFP calculated?
The NFP report is based on two surveys: the establishment survey and the household survey. The establishment survey collects data from businesses and government agencies, while the household survey collects data from households.
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The establishment survey collects information on the number of employees, hours worked, and wages paid. It covers about 142,000 businesses and government agencies, representing approximately 689,000 individual worksites. The household survey collects information on the labor force, including employment, unemployment, and demographic characteristics.
How does NFP affect the market?
NFP is one of the most closely watched economic indicators, and its release can have a significant impact on financial markets, particularly currency markets. A higher-than-expected NFP report typically leads to a stronger US dollar, as it indicates a stronger labor market and economy. On the other hand, a lower-than-expected NFP report typically leads to a weaker US dollar, as it indicates a weaker labor market and economy.
In addition to affecting currency markets, the NFP report can also impact stock and bond markets. A strong NFP report is typically bullish for stocks, as it suggests a strong economy and increased corporate profits. Conversely, a weak NFP report is typically bearish for stocks, as it suggests a weak economy and decreased corporate profits.
Conclusion
Non-Farm Payroll is an essential economic indicator that provides valuable insights into the health of the US labor market and the overall economy. Understanding NFP and how it affects the market is crucial for traders, investors, and policymakers. By keeping an eye on the NFP report and its impact on financial markets, you can make informed investment decisions and stay ahead of the curve.
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