What is the Non-Farm Payroll Report?

CME Group2

08/15/17

The content has been provided by a third party not affiliated with E*TRADE. The material is for educational purposes only.

 

Disclaimer

The information in the market commentaries have been obtained from sources believed to be reliable, but CME Group does not guarantee its accuracy and expressly disclaim all liability. Neither the information nor any opinions expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts. The information on this site compiled by CME Group is for general purposes only. All information and data herein is provided as-is. CME Group assumes no responsibility for any errors or omissions. CME Group, its affiliates and any third party information and content providers expressly disclaim all liability with respect to the information and data contained herein including without limitation, any liability with respect to the accuracy or completeness of any data. You use the data herein solely at your own risk. All data and information provided herein is not intended for trading purposes or for trading advice.

CME Group, the Globe Logo, Chicago Mercantile Exchange Inc., Globex and CME are trademarks of Chicago Mercantile Exchange Inc. CBOT is the trademark of the Board of Trade of the City of Chicago, Inc. NYMEX is the trademark of the New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other marks are held by their respective owners.

Copyright (c) 2017 CME Group. All rights reserved.

What is the Non-Farm Payroll Report?

 

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.

Visit the Futures Research Center to explore market data and trading insights.