A:

Traders are constantly monitoring various economic indicators to identify trends in economic growth. Some of the most watched economic indicators include the Consumer Price Index, housing starts, gross domestic product and the employment report. Out of these indicators, the employment report contains a variety of data and statistics regarding the employment information of the market.

The employment report is released on the first Friday of every month by the Bureau of Labor Statistics, providing data covering the previous month. The report contains information on unemployment, job growth and payroll data, among other stats.

Out of the payroll data that is provided, the most important statistic that is analyzed is the non-farm payroll data, which represents the total number of paid U.S. workers of any business, excluding general government employees, private household employees, employees of nonprofit organizations that provide assistance to individuals, and farm employees. This data is analyzed closely because of its importance in identifying the rate of economic growth and inflation.

As with other indicators, the difference between the actual non-farm data and expected figures will determine the overall effect of the data on the market. If the non-farm payroll is expanding, this is a good indication that the economy is growing, and vice versa. However, if increases in non-farm payroll occur at a fast rate, this may lead to an increase in inflation. In forex, the level of actual non-farm payroll compared to payroll estimates is taken very seriously. If the actual data comes in lower than economists' estimates, forex traders will usually sell U.S. dollars in anticipation of a weakening currency. The opposite is true when the data is higher than economists' expectations.

To learn more, see Trading On News Releases, A Guide To Conference Board Indicators and Economic Indicators To Know.

RELATED FAQS
  1. What does the Bureau of Labor Statistics do?

    By collecting, analyzing and reporting on important economic data, the Bureau of Labor Statistics has become a critical information ... Read Answer >>
  2. What are the most common market indicators to follow the U.S stock market and economy?

    Understand some of the key indicators analysts use to follow the U.S. stock markets and to assess the overall condition of ... Read Answer >>
  3. What data does the Bureau of Labor Statistics collect?

    Collected data includes unemployment numbers, inflation, prices, pay and benefits, time use of Americans, import/export numbers ... Read Answer >>
  4. Is the Bureau of Labor Statistics accurate?

    Read this brief analysis of the accuracy of Bureau of Labor Statistics, including a summary of the types of reports issued ... Read Answer >>
  5. What is the difference between market indicators and economic indicators?

    Read about the differences between technical market indicators and general economic indicators, and learn how traders and ... Read Answer >>
  6. How does the Bureau of Labor Statistics determine the Consumer Price Index (CPI)?

    Changes in the average price level of more than 200 goods and services across the U.S. economy are used to determine the ... Read Answer >>
Related Articles
  1. Investing

    The Implications of Nonfarm Payroll

    The nonfarm payroll is a key economic indicator that’s closely monitored by analysts and investors around the world.
  2. Trading

    Forex: Trading The U.S. Nonfarm Payroll Report

    The U.S. nonfarm payrolls will always serve as an important piece of news for the currency investor and trader.
  3. Managing Wealth

    Economic Indicators That Do-It-Yourself Investors Should Know

    Understanding these investing tools will put the market in your hands.
  4. Trading

    5 Reports That Affect The U.S. Dollar

    These five reports provide short- and long-term insight into the valuation of the U.S. dollar.
  5. Markets

    What You Need To Know About The Employment Report

    This widely watched indicator of economic well-being directly influences the market.
  6. Markets

    4 Key Indicators That Move The Markets

    Find out what reports to watch in order to anticipate and react to market movements.
  7. Markets

    Will a Solid Payroll Report Mean a June Rate Hike?

    Is a June rate hike in the cards if the May 6 payroll report comes in favorable?
  8. ETFs & Mutual Funds

    Introduction To Coincident And Lagging Economic Indicators

    Investors can learn a lot, or very little, from these indicators once they know how to use them.
  9. Markets

    America’s Labor Market: Hidden Distortions and Uncertain Forecasts

    Employment reports released by the Bureau of Labor Statistics have a profound impact on political, business, consumer, and investor behavior.
  10. Markets

    Decline In Nonfarm Payrolls Elicits Mixed Reaction

    U.S. nonfarm payrolls declined in January. The number does not provide enough indication about the economy's state, however.
RELATED TERMS
  1. Nonfarm Payroll

    A statistic researched, recorded and reported by the U.S. Bureau ...
  2. Employment Situation Report

    A monthly report compiling a set of surveys in an attempt to ...
  3. Payroll

    The sum total of all compensation that a business must pay to ...
  4. Indicator

    Indicators are statistics used to measure current conditions ...
  5. Economic Indicator

    An economic indicator is a piece of economic data, usually of ...
  6. Payroll Tax

    Tax an employer withholds and/or pays on behalf of their employees ...
Hot Definitions
  1. Poison Pill

    A strategy used by corporations to discourage hostile takeovers. With a poison pill, the target company attempts to make ...
  2. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  3. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  4. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  5. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  6. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
Trading Center