What Is Jobs Growth?
Jobs growth is measured in the U.S. by the number of employees added to nonfarm payrolls monthly, as reported by the U.S. Bureau of Labor Statistics (BLS). It is a key indicator of the pace of economic expansion. Nonfarm payrolls are part of the Employment Situation Summary published by the BLS, the widely followed statistical release better known as the monthly jobs report.
- Jobs growth is measured by the monthly change in nonfarm payrolls as reported by the U.S. Bureau of Labor Statistics.
- Monthly jobs growth of about 84,000 is estimated to be required to keep up with the gradual growth of the U.S. labor force, keeping the employment market steady.
- Jobs growth figures are released monthly and are subject to revisions over the next two months as additional survey results are collected.
- These figures often move financial markets as one of the most important and timely economic indicators.
- Farm employment and agricultural jobs aren't included in these calculations.
Understanding Jobs Growth
Jobs growth refers to the net increase in the number of nonfarm payrolls during the previous month. This number is widely followed because employment is crucial for economic performance. A monthly increase of about 84,000 nonfarm payrolls is the estimated steady-state jobs growth rate that is in line with the gradual expansion of the labor force. Bigger gains suggest growth above the trend, while smaller ones or outright losses may signal a slowdown.
That said, it is important to remember that the jobs growth numbers in the employment situation summary are estimates. The numbers for a given month are revised in each of the next two monthly reports based on additional survey submissions. A monthly nonfarm payroll increase of about 100,000 is considered statistically significant.
The rise in total U.S. nonfarm payroll employment in May 2022. The unemployment rate, derived from a separate survey, remained at 3.6%.
How Jobs Growth is Measured
The Bureau of Labor Statistics compiles jobs growth data by surveying about 145,000 businesses and government agencies accounting for about a third of total U.S. nonfarm employment. The Employment Situation Summary provides data from this "establishment survey" tracking nonfarm employment by industry as well as a separate household survey of employment status. The two surveys provide the headline-making figures on jobs growth and unemployment.
Although nonfarm payrolls are subtotaled by industry, the most commonly reported number is the net change in U.S. payrolls from the preceding month, which estimates the number of jobs added outside the agricultural sector. Farm employment is excluded from the establishment survey because it is too seasonal and harder to estimate.
Because of how important it is to the economy, jobs growth is closely watched by the Federal Reserve as it makes changes to its monetary policy.
How Jobs Growth is Used in Investing
As a comprehensive measure of U.S. employment and one of the earliest economic reports for a given month, the Employment Situation Summary often moves financial markets. In addition to tallying nonfarm payrolls, the establishment survey estimates average weekly hours worked—a measure of labor demand—as well as average hourly earnings, an early indicator of labor cost inflation.
Because of the report's importance to investors and policymakers, traders compare the numbers in it to the consensus of analysts' forecasts to get an early sense of whether, for example, nonfarm payroll gains in the latest month exceeded or trailed market expectations.
Since the numbers fluctuate from month to month and are subject to significant revisions, it takes more than a single report to establish a trend. Investors must also consider jobs growth in the context of other economic indicators. Despite those limitations, the monthly jobs growth remains a key indicator of how the economy was faring very recently.