What Is the Employment Situation Report?

The Employment Situation report is a monthly report compiling a set of surveys in an attempt to monitor the labor market. Also known informally as the labor report, the Employment Situation Report is released by the Bureau of Labor Statistics, which is part of the U.S. Department of Labor.

It summarizes total non-farm payroll employment in the United States by surveying over U.S. businesses and households. In short, it provides insight into who is working (and not working), what industries are seeing job gains and losses, and includes data broken down by age, gender, race and other groupings.

Key Takeaways

  • The Employment Situation Report is a monthly report put out by the U.S. department of labor, commenting on employment data.
  • It is also known as the labor report and provides a deeper dive into the employment data beyond the headline unemployment rate.
  • Economists and analysts may use the Employment Situation Report as a leading indicator for consumer spending and other metrics which can affect markets.

Understanding the Employment Situation Report

The data in the Employment Situation report provides investors with knowledge beyond the headline unemployment rate, and lets them know what the workers in the nation are making and how long they are working. This report is highly important to investors and can move the markets. The information is timely regarding both wage and job growth. Many analysts consider this the best single measure of the health of the economy. The tone of this report often sets the tone of other economic reports released during the month. But there is so much information provided that it's important to identify the numbers that will be most watched.

The non-farm payrolls figure is very important on Wall Street; it's the benchmark labor statistic used to determine the health of the job market because of its large sample size and historical significance of accurately predicting business cycles.

The payroll figures from the establishment report are considered a coincident indicator.

Financial markets may react to the Employment Situation report, as it can be an indicator of the overall health of an economy. It may also act as a bellwether for consumer spending trends and other key economic indicators. As such, the reaction in the release of such labor market information can be dramatic, which makes such information very valuable to investors.

The Employment situation report is actually a compilation of two surveys. The first survey—of 145,000 businesses—covers over 500 industries in several hundred metropolitan areas to form a snapshot of how the labor market is performing nationally, regionally, and by city. The survey reaches about a third of all American non-farm workers. It excludes the self-employed, private households and agricultural workers.

The second survey covers about 60,000 households to glean information about joblessness. This data is collected by the U.S. Census Bureau and the Bureau of Labor Statistics, which produced the July 2020 Employment Situation Summary Report.

Employment Situation Report: Key Data

The Employment Situation report offers a wide variety of data. It includes:

  • The unemployment rate: The number of unemployed workers and the change of the number of unemployed people in the United States expressed as a percentage of the labor force.
  • Non-farm payroll employment: The number of employees working in U.S. business or government. This includes either full-time or part-time employees.
  • Average workweek: The average number of hours per week worked in the non-farm sector.
  • Average hourly earnings: The average basic hourly rate for major industries.
  • Job creation: The number of new jobs created in the U.S., as well the industries those jobs are in.

Strengths of the Labor Report

  •      As one of the most widely watched reports, the “Employment Situation Report” gets a lot of press and can move the markets
  •      Relates to investors on a personal level; everyone understands having a job or looking for work
  •      Service industries are covered here—it is hard to find good indicator coverage of service-based businesses

 Weaknesses of the Labor Report

  •      Summer and other seasonal employment tends to skew the results
  •      Only measures whether people are working; it does not take into account whether these are jobs the people wish to have, or whether they are well-suited to workers' skills
  •      Volatile; revisions can be quite large, and updates should always be viewed in the most recent report
  •      Unemployment and payroll figures can seem to be out of alignment, as they are derived from two different surveys
  •      The compensation cost portion is considered inferior to the Employment Cost Index