The non-farm payrolls (NFP) statistic is called the mother of all releases, and for good reason. Apart from stating the total change in employment in the private and public sectors during the past month, various pieces of data contained in the release work to create an impressive picture of general economic trends in the U.S.

The data is released on the first Friday of each month by the BLS. It is divided into the two major sections of household and establishment surveys, and although short term divergences in value are possible, the two surveys tend to gravitate towards each other over time.

Household Survey

This section mostly contains demographic data, such as the racial and age breakdown of employment in various categories, but it also contains some vital statistics that relate to the unemployment ratio. The survey is conducted by asking questions to a sample of households by phone, and due to the large number of households, and the relatively small sample size in comparison, it is thought to be somewhat less reliable than the establishment survey.

Establishment Survey

The establishment survey contains much of the tradeable information in the report. Weekly average earnings, the sectorial breakdown of layoffs, or hiring, are all included in this section of the NFP. The headline number of net hiring or layoffs is also reported here. Weekly average earnings can signal future spending trends, of vital importance to the American economy. The headline number can lead to huge volatility if it diverges from consensus expectation (and sometimes even when it doesn’t).

Analyzing the NFP

The NFP supplies a lot of useful information which may be hard to place in a context at times. There are a number of guidelines, nonetheless, that can help make the process easier.

The NFP is a lagging indicator

Non-farm payrolls data lags GDP growth by one or two quarters, so it is mostly useful as a timing and confirmation indicator. Central bank authorities tend to react in the strongest manner to changes in unemployment, so while NFP cannot predict economic trends, it does predict or confirm central bank bias with great accuracy.

Focus on the private sector

Government’s hiring policies are hard to interpret since they are influenced by political considerations, distorting the economic trends in the background. Thus, in analyzing NFP we’ll prefer to focus on private sector data by eliminating government contribution to unemployment.

NFP can be misleading

The non-farm payrolls report is prone to suffering large revisions at times due to strikes, plain reporting errors, and confusion that arises as holidays end, or the school semester begins. It is also subject to benchmark revisions on the basis of census data from time to time, which can drastically alter the picture painted by the report up to the point of revisal. The reaction of the market is notoriously unpredictable and chaotic as well, leading to fluctuations that may reach a total of several 100 pips in a very short time. In short, the NFP report should be evaluated with caution.


Keep an eye on the NFP releases. They can signal the beginning or end of recessions. They can be the trigger for major shifts in central bank policies, and create new trends in the fore market. With all its shortcomings, without a doubt the NFP is the most precious piece of data available to fore traders.

Next step: Producer Price Index (PPI)