Employment data (Nonfarm Payrolls, NFP)
An indicator of how many jobs were added in U.S. sectors excluding agriculture over the past month — a thermometer for the economy and a key basis for the Fed's rate decisions.
Nonfarm payrolls = the monthly change in jobs in industries excluding agriculture (U.S. Department of Labor, released the first Friday of each month)
Strong employment is usually a good sign for the economy, but in a phase where prices are hot it can be read as "employment too strong → rates may rise further," which can instead weigh on the stock market.
In plain terms
Nonfarm payrolls show how much jobs across all U.S. industries except farming (factories, services, construction, and so on) rose or fell compared with the previous month. It is released on the first Friday of each month, and that day is known as "jobs day," when markets grow tense.
A large increase in jobs means the economy is solid. The unemployment rate and average hourly earnings (rising wages add price pressure) are released at the same time and are viewed together.
What it tells you
Employment is the economy's thermometer. People need jobs to spend, and when spending circulates, company results improve too. So employment data shows the big picture of the economy.
The Fed targets "maximum employment" alongside "price stability," so employment data is a core basis for rate decisions. If employment runs too hot, it can stir wages and prices and tilt things toward rate hikes.
Formula
Nonfarm payrolls = the monthly change in jobs in industries excluding agriculture (U.S. Department of Labor, released the first Friday of each month) Indicators viewed alongside it: unemployment rate, average hourly earnings
What high or low means
Strong employment is usually a good sign for the economy, but in a phase where prices are hot it can be read as "employment too strong → rates may rise further," which can instead weigh on the stock market. The same number gets read the opposite way depending on the phase.
A single month's number is choppy and sometimes revised later, so looking at a few months' trend is more accurate than one reading.
"Good employment = stocks rise" isn't always true. When prices are the concern, strong employment can lead to rate-hike worries and act like bad news for stocks. The same indicator reads differently depending on what the market is worried about at the time.
Reported figures are often revised afterward. It shows up in the trend rather than the first release.
Employment data is macro data, so market reactions aren't always consistent. This term is background knowledge for understanding market news. (※ Our screens deal with individual companies' SEC-filed financials.)
Metrics to read alongside
See it in real stocks
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This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.