What is non farm payrolls and how do you trade it

What are non-farm payrolls?

Non-farm payrolls (NFP) are monthly measurements of how many workers there are in the US, excluding farm workers and a few other job types such as government workers, private households and non-profit employees.

The data is collected on a monthly basis by the Bureau of Labor Statistics (BLS) and put into the ‘Employment Situation’ report, which also includes the unemployment rate. The report is released on the first Friday of every month at approximately 8:30am EST – which is 1:30pm GMT.

Each report looks back at data from the previous month, using two surveys:

1. The Household Survey – this provides details on employment demographics, including unemployment rates by gender, race, education level and age
2. The Establishment Survey – this provides the headline number of new non-farm payroll jobs to the economy. It’s usually this section of the data that is referred to as NFP. It details the number of jobs added by industry, hours worked, and average hourly earnings

Understanding NFP releases

NFP releases and unemployment data are used by economists and politicians to assess the state of the US economy, and to create an outlook for future economic activity. There are a few areas that traders particularly should watch out for:

• Unemployment data: This is the most closely watched figure, as it has the most influence over the Federal Reserve’s judgement of economic health
• Sector growth: The report shows which sectors are expanding by adding jobs and which are contracting, contributing to unemployment. This can give an idea of which stocks, indices and ETFs could rise and fall in the future
• Hourly earnings: Wage increases and decreases is also another area of the report that gets attention – as pay growth shows economic health, while reductions in wages shows declining prosperity and falling consumer spending. This could have a knock-on effect to company revenues
• Revisions of the previous NFP report: Any changes to previous growth expectations can create market movements as traders re-assess their current positions

Non-farm payroll dates 2024

Take a look at the upcoming NFP dates for 2024. Each report is released on the first Friday of the month at 8:30 am US time, which is 1:30 pm UK time. 

*Adjusted for daylight savings differences.

How do US non-farm payrolls impact forex markets

The monthly non-farm payroll report has a substantial impact on forex markets because it’s used by traders as a leading indicator of economic growth, alongside inflation, gross domestic product (GDP) and the monthly payroll report.

If the NFP shows a healthy US economy – with high employment, job growth and wage increases – it’s likely to attract investment from around the world. This could drive up the price of the US dollar and impact major currency pairs.

However, if the NFP shows an unhealthy US economy – with high unemployment, low job growth and wage stagnation – then investment rates will fall. This would likely cause the US dollar to fall in comparison to other currencies.

Keep an eye on pairs such as GBP/USD, EUR/USD and USD/JPY, as well as the US dollar index.

How do US non-farm payrolls impact other markets

Non-farm payrolls reports look at the impact the labour force has on the economy, which will have knock on effects for the stock market and the price of commodities – largely gold and silver.

When the NFP presents strong employment figures, this is a sign that companies across industries are doing well, which can lead to increased optimism around company stocks. However, as positive data also creates a strong dollar, this can negatively affect US indices such as Dow Jones and the S&P 500 – which tend to have a negative correlation with a stronger dollar.

If the NFP data indicates the US economy is in a period of contraction, popular safe havens such as gold and silver may see increased investment flows.

How to trade non-farm payrolls and NFP news releases

1. Open a trading account
2. Research analyst’s predictions for NFP numbers
3. Choose an asset to trade and enter your trade
4. Monitor the market around and after the NFP release
5. Adjust and close positions as necessary

Before the NFP release, economists and analysts will attempt to predict what the headline NFP number will be, and eventually arrive at a consensus estimate. Once the real figures are released, the market response will depend on how close the estimate was to the actual figure – as any surprises will cause traders to rush in and out of positions.

View the most recent news and analysis.

The volatility the NFP creates is what provides traders with opportunities for profit – but it is also risky. This makes it important to have a risk management strategy in place before you trade.