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financial event non farm payroll (nfp)

US Non-Farm Payroll (NFP)

What is Non-Farm Payroll (NFP)

Non-Farm payroll employment refers to all US-related goods, construction, and manufacturing companies in the U.S.

It excludes farm workers, private household employees, or non-profit organization employees. Non-Farm Payrolls (NFP) measure the number of jobs gained in the U.S. during the previous month that are not farm related. The Non-Farm Payroll report offers insights into monthly and yearly data. Month-on-month includes data on last month’s number compared to the prior, while year-on-year shows last month’s figures compared to the same month a year earlier.

You can take a position on the U.S. dollar and U.S. indices based on whether the Non-Farm Payrolls will come in above or below expectations.

The Employment Situation Report from the Bureau of Labour Statistics releases in line with the NFP report.
The announcement of the Non-Farm Payroll report is available every first Friday of each month at 8:30 am ET.

Why is the (NFP) Important for Traders and Investors

The NFP (Non-Farm Payrolls) report is important for traders and investors because it provides a snapshot of the U.S. labor market and is considered a key indicator of economic health. The NFP measures the change in the number of employed people in the country, excluding farm workers, government employees, and private household employees.

A strong NFP report often indicates a growing economy, leading to increased consumer spending and higher interest rates, affecting various financial markets such as equities, bonds, and currencies. On the other hand, a weak NFP report can suggest a slowing economy and potentially lower interest rates, affecting the markets differently. Therefore, the NFP report can significantly impact the financial markets and is closely watched by traders and investors.

How to read the (NFP) report

Reading the NFP (Non-Farm Payrolls) report requires a basic understanding of the labor market and the different components of the report. The report measures the change in the number of employed people in the country, excluding farm workers, government employees, and private household employees.

It is important to look at the headline number, which represents the net change in employment over the month, as well as the unemployment rate, which measures the percentage of the labor force that is unemployed but actively seeking employment.

Additionally, it is helpful to look at the average hourly earnings, which provides insight into wage growth and consumer spending. To gain a complete picture of the labor market, it is also important to consider other data and indicators, such as the participation rate, which measures the percentage of the working-age population that is either employed or actively seeking employment, and the length of the average workweek, which provides insight into the level of worker utilization. By considering these different components and how they fit into the larger economic picture, it is possible to get a comprehensive understanding of the NFP report and what it means for the economy and the financial markets.

What Impact Does a Higher Non-farm Payroll Have on the Foreign Exchange (Forex) Market?

A higher Non-farm Payroll (NFP) report can positively impact the foreign exchange (Forex) market. When the NFP shows strong employment growth, it indicates a growing economy. It can increase investor confidence, leading to higher demand for the currency of the country that released the report. This increase in demand can cause the currency to appreciate against other currencies, leading to stronger exchange rates.

Additionally, when employment is strong, the country’s central bank may raise interest rates to combat inflation and control economic growth, making the currency more attractive to investors seeking higher investment returns. That can further drive-up demand for the currency and lead to even stronger exchange rates.

However, it is important to note that other economic and political factors can also impact the Forex market, and the effects of the NFP report can be short-lived, so traders and investors must consider a range of data and market conditions when making trading decisions.

Where to find the (NFP) report

In Traders Trust, the NFP report is available every first Friday of each month, posted on our social media accounts.