What Is Nonfarm Payroll?
Nonfarm Payroll (NFP) is a monthly US employment report published by the Bureau of Labor Statistics, measuring the change in the number of employed people, excluding those working in farming, private households, and a few other categories not covered by the survey.
What NFP Tells Traders
-
Change in total non-farm employment for the month
-
Average hourly earnings and weekly hours worked across the economy
-
Unemployment rate, published alongside the headline figure
Why NFP Is Closely Watched
As one of the most prominent indicators of US economic health, the NFP report is released on the first Friday of most months and can lead to sharp moves across currency, equity and bond markets shortly after publication.
How Markets Typically React to NFP
A stronger-than-expected NFP figure is often associated with currency strength and can influence expectations around future interest rate decisions, while a weaker-than-expected figure can have the opposite effect. That said, market reaction isn’t always straightforward, since other details within the report, such as wage growth or revisions to previous months’ data, can sometimes outweigh the headline employment number in shaping how markets actually respond.
NFP and Revisions to Previous Data
Alongside the current month’s figure, the NFP report typically includes revisions to the previous two months’ data, which can sometimes attract as much attention as the headline number itself. A significant revision can change the overall picture of recent employment trends, occasionally leading to a market reaction driven more by the revision than by the new month’s figure on its own.
Preparing for an NFP Release
Given the potential for sharp, sudden price movement around the release, some traders choose to reduce position sizes or step away from the market entirely in the minutes surrounding the scheduled time, rather than holding a full position into an outcome that’s inherently difficult to predict. Others specifically look to trade the volatility the release tends to generate, though this approach typically requires a clear plan for managing the faster price action that often follows.
NFP and Other Countries’ Employment Data
While NFP refers specifically to the US report, many other countries publish their own employment data on a similar schedule, and traders focused on other currencies often follow the equivalent release relevant to their markets of interest. The US report tends to draw outsized global attention, however, given the size of the US economy and the US dollar’s role in the broader financial system.
Historical Context for NFP Releases
Looking at how markets have reacted to past NFP releases, particularly during periods of similar economic conditions, can offer some context for what kind of reaction a given release might generate, though past reactions are never a reliable guide to how the market will respond on any specific occasion. Each release is ultimately assessed against its own set of expectations and the broader economic backdrop at the time.
A Monthly Pulse Check on the US Economy
Nonfarm Payroll offers a regular snapshot of US employment conditions that ripples across global markets. Understanding what the report measures helps explain why it draws so much attention each month.
⚠ Risk Warning:CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. Ensure you fully understand how CFDs work and whether you can afford to take the high risk of losing your money.
Back
