Definition: What are Non-Farm Payrolls

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Non-Farm Payrolls is one of the fundamental indicators that many traders use as a reference regarding the health of the United States economy. This is because this data provides an overview of the number of absorption of new workers in the superpower country.

Fundamentalists make investment decisions based on current conditions and predictions and expectations for the future of the economy. Various indicators and statistical data are taken as a reference in order to get a complete picture of the current reality.

In contrast to technical analysis which relies on historical data and various techniques of translating graphics, fundamental analysis requires skills to respond to reality. One of the indicators in seeing the reality of the economic condition of the United States as a superpower is Non-Farm Payrolls.

Get to know Non-Farm Payrolls

non farm payroll dates 2021

Non-Farm Payrolls is data released by the US Bureau of Labor Statistics (BLS) on the first Friday of each month. This data contains reports on the total income of workers in all sectors except agriculture, self-employment, domestic work, government employees, military and military agencies.

According to data released by the US Bureau of Labor Statistics, as many as 80% of the business sector in the United States that contributes to its national Gross Domestic Product (GDP) employs workers belonging to this group. Therefore, NFP is one of the important indicators that can represent the economic situation in the United States.

When the global COVID-19 pandemic occurred, the number of non-farm payrolls was also affected. This also indicates the number of unemployed whose data was also released along with Non-Farm Payrolls data in a report titled Employment Situation.

Employment Situation is a report that is summarized based on two comprehensive surveys, namely the household survey and the establishment survey. Both of them produced two separate reports which were then compiled together into a comprehensive report that was cross-checked and complemented each other.

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What is the full description of the two surveys like?

Household Survey

The household survey provides information on the unemployment rate and the breakdown of occupational demographics. The details in the household survey include:

  • Unemployment
  • Unemployment Rate by Gender
  • Unemployment Rate by Tribe
  • Unemployment Rate by Education Level
  • Unemployment Rate by Age
  • The Reason Behind Unemployment
  • Employment Data Based on Alternative Types of Work
  • Participation Rate

Economists analyze Household Survey data when considering trends in the unemployment rate, participation rate, and other trends that may be related to demographics.

Survey Establishment

Meanwhile, establishment surveys provide information on employment conditions. One of the segments in the establishment survey is the non-farm payrolls report, which reports the number of new paid jobs created in the national economy.

The components in this report include:

  • The Total Number of NFPs Increase
  • Addition of NFP Based on Industry Category, namely durable goods, non-durable goods, services, and government.
  • Working Hours Details
  • Average Hourly Earnings Details.

The establishment survey including the Non-Farm Payrolls report offers valuable information on sectors with detailed sector segregation.

Several types of analysts may incorporate sector-specific Non-Farm Payrolls data into their analysis. This breakdown is often used by stock analysts who report on the stock sector and earnings releases.

Economic Analysis Based on Non-Farm Payrolls

The data presented by the U.S Bureau of Labor Statistics is valuable information that provides insight into the current situation. This data is often used as a reference in decision-making by policymakers in the United States. In turn, the decisions made will affect the performance of the market and your investment instruments.

Both the stock market, the exchange rate against the United States Dollar, as well as the price of gold and debt securities reacted to this report.

NFP statistics can also be used to find out which sectors are developing and which are contracting. A developing sector will increase the number of jobs and the number of salaries. When contracted, the number of jobs and the nominal received by workers will decrease.

Historically, the best month for wage growth has usually been May, with an average of 129,000 additional jobs. August was the worst month, with an average of 69,000 additional jobs.

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The best NFP data in the United States occurred in 1994 with 3.85 million jobs added. In 2009, the workforce lost 5.05 million jobs, marking the worst statistical year for NFP numbers. In 2018, payroll employment growth reached 2.6 million compared to an addition of 2.2 million in 2017 and 2.2 million in 2016.

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