Non-farm payrolls are coming! Newbies can understand this important data in one article

Why are traders around the world terrified of this night?

The Non-Farm Payrolls Report (NFP) is a key economic indicator in the United States and is closely watched by global financial markets, analysts, traders, funds, investors and speculators. Why is it so important? How does it affect major financial assets? How should we view this report? This article will answer these key questions.

What is non-farm payrolls?

The U.S. Bureau of Labor Statistics (BLS) surveys private and government entities around the country every month to obtain information on recruitment and employment and form a report, which is often called the "Non-agricultural Employment Report (NFP)", which covers key information such as unemployment rate, non-agricultural employment, labor participation rate, wages and working hours. Among them, non-agricultural employment measures the number of U.S. labor forces outside of agriculture, private households, owners, non-profit employees and active military personnel, which includes about 80% of the total number of U.S. workers.

The report is created from two combined surveys: the household survey and the establishment survey. The household survey reports the unemployment rate and details employment demographics, while the establishment survey focuses on the number of new nonfarm jobs added to the national economy. The report reflects data from the previous month and, while not a leading indicator, provides an overview of the job market that affects the overall economy.

The non-farm payrolls report not only tells us how many jobs have been lost or created, but also gives us the latest updates on wage pressures, which are an important driver of inflation. If average hourly earnings are on an upward trend, it could further fuel inflation. In addition, the non-farm payrolls report has the potential to signal a turning point in the overall health of the U.S. economy, which will affect Wall Street's expectations of the monetary policy that the Federal Reserve will adopt.

In terms of release time, with a few exceptions due to market holidays, the non-farm payrolls report is released on the first Friday of each month at 8:30 a.m. Eastern Time. If converted to Beijing time, the corresponding time for summer time is 20:30 Beijing time and for winter time is 21:30.

2024 Non-Farm Schedule

Publication date Publication data

January 5, 21:30 Non-agricultural employment in December after seasonal adjustment (10,000 people)

February 2, 21:30 Non-agricultural employment in January after seasonal adjustment (10,000 people)

March 8, 21:30 Non-agricultural employment in February (10,000 people)

April 5, 20:30 Non-agricultural employment in March after seasonal adjustment (10,000 people)

May 3 20:30 Non-agricultural employment in April after seasonal adjustment (10,000 people)

June 7, 20:30 Non-agricultural employment in May (10,000 people)

July 5, 20:30 Non-agricultural employment in June after seasonal adjustment (10,000 people)

August 2, 20:30 Non-agricultural employment in July (10,000 people)

September 6, 20:30 Non-agricultural employment in August (10,000 people)

October 4, 20:30 Non-agricultural employment in September after seasonal adjustment (10,000 people)

November 1, 20:30 Non-agricultural employment in October (10,000 people)

December 6, 21:30 Non-agricultural employment in November (10,000 people)

2024 Non-Farm Schedule

What to watch in non-farm payrolls?

The non-farm payrolls report itself contains a lot of information about the U.S. job market, and most traders and investors will focus on the following key data.

First, new non-farm payrolls. Traders will first focus on this headline data, which directly reflects the state of the job market. New payrolls that are higher than expected usually indicate a healthy economy, which may drive up stocks and a stronger dollar; while those that are lower than expected may indicate a weak economy, leading to lower stocks and a weaker dollar.

Second, the correction value. Given the size and complexity of the data, non-farm payrolls reports tend to be revised from last month. Data revisions can sometimes significantly impact market expectations. For example, if the previous month's data is revised up significantly, this may offset the negative impact of the current month's data not being as expected, and vice versa.

Third, the unemployment rate. The unemployment rate, which is the proportion of workers who are currently unemployed but are actively looking for work, is a sign that the economy is in good shape, while a higher unemployment rate may indicate that the economy is facing challenges. Compared with the number of new non-agricultural jobs, the changes in this number are relatively small, and changes as small as 0.2% in either direction can generally be considered large changes.

Fourth, wage data. Wage growth is an important precursor to inflation. Fast wage growth may

As a result, inflationary pressures increased, prompting the Federal Reserve to increase

Traders closely watch the data to assess the future direction of monetary policy.

Fifth, the labor force participation rate. This data shows the proportion of the population that is eligible for work and willing to work to the total working-age population, which helps to assess the true state of the job market. Even if the unemployment rate falls, if the labor force participation rate also falls, it may indicate that more people are withdrawing from the labor market, which is not necessarily a sign of economic health.

The impact of non-agricultural

The performance of nonfarm payrolls has a significant impact on multiple asset classes in financial markets because it is one of the important indicators of the health of the U.S. economy. Wall Street will be in wait-and-see mode ahead of the data release. After the data is released, if the actual published value is far from the consensus of economists, it may trigger significant financial market fluctuations. For example, the April non-agricultural report released in May 2024 was lower than expected, spot gold fluctuated as much as $25 within 15 minutes, and the U.S. dollar index fell sharply in the short term.

Below is the theoretical impact of the non-farm report on major financial assets.

1. Foreign exchange market

US Dollar: Strong non-farm payrolls (i.e. higher-than-expected job creation) typically boosts the dollar as it means the economy is doing well and could prompt the Federal Reserve to raise interest rates. Conversely, weak data could lead to a weaker dollar.

Major currency pairs (such as EUR/USD, GBP/USD): Under the influence of non-agricultural data, if the US dollar strengthens, currency pairs such as EUR/USD and GBP/USD will fall; if the US dollar weakens, these currency pairs will rise.

2. Stock Market

U.S. stock markets (such as the S&P 500 and the Dow Jones Industrial Average): Strong non-farm data may indicate strong economic growth, which can boost the stock market. However, overly strong data may also raise concerns about interest rate hikes, which can curb stock gains. Weak data usually has a negative impact on the stock market, but it may also raise expectations of loose policies by the Federal Reserve, which can boost stocks in the short term.

Industry sectors: When non-agricultural data performs well, cyclical industries (such as finance and industry) usually benefit; on the contrary, defensive industries (such as utilities and consumer goods) may perform mediocrely.

3. Bond Market

U.S. Treasury yields: Strong non-farm data usually leads to higher Treasury yields, as the market expects the Federal Reserve to raise interest rates to prevent the economy from overheating. Conversely, weak data may lead to lower Treasury yields.

Bond prices: move in the opposite direction to yields; when yields rise, bond prices fall, and vice versa.

4. Commodities

Gold: As a safe-haven asset, gold usually rises when non-farm data is weak (indicating economic weakness or increased risks). On the other hand, gold prices usually fall when the data is strong (indicating a healthy economy and rising expectations of rate hikes).

Oil: Oil prices react more complexly to non-farm payrolls data. Strong data could push oil prices higher, as economic growth is usually accompanied by increased energy demand; but if strong data triggers expectations of rate hikes, leading to a stronger dollar, oil prices could fall, as a stronger dollar usually suppresses dollar-denominated commodity prices.

5. Other assets

Cryptocurrency: The cryptocurrency market reacts indirectly to the non-farm payrolls report, but as institutional investors participate more, this market may begin to show similar reaction patterns to traditional markets. Strong non-farm payrolls data may have a negative impact on major cryptocurrencies such as Bitcoin, as they are often seen as a hedge against inflation or economic uncertainty.

Key Considerations

In general, non-farm payrolls affect investment and non-farm payrolls affect the

The non-farm payrolls report is a widely used tool for investors to predict the health of the economy and the Fed's policies, which in turn has a wide and far-reaching impact on major asset classes. However, given that financial markets are simultaneously pulled by multiple bullish and bearish factors, the market trend may not always conform to the theory. Moreover, the initial market reaction is often very volatile because it is driven by the overall non-farm payrolls data. After a few minutes, the financial market tries to fully digest the entire non-farm payrolls report, which can sometimes trigger a complex market reaction.

For example, in October 2023, the US non-farm data for September exceeded expectations, and the data for the previous two months were significantly revised upward, which led to a sharp increase in investors' expectations for the Fed's interest rate hikes, and the market once staged a "double kill of stocks and bonds". But then the market reversed dramatically, with US bond yields gradually giving up more than half of their gains, the three major US stock indexes turning positive during the session, and technology stocks rising across the board.

Therefore, traders and investors should pay more attention to risk management before and after the data is released to avoid unnecessary and unexpected losses caused by sharp market fluctuations.

Emphasis: The content of this article is for reference only and does not constitute any investment advice. Please be cautious when investing. Please fully understand the relevant risks before making any investment decisions.

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