What is Non-Farm Payroll and How to Trade It? 📚

Hey traders,

This week, on Friday, we are expecting Non-Farm Payroll Report.
In this educational article, I will try to explain to you why that fundamental data is so important
and I will share with you the insights how to trade it.

Non-Farm Payroll is one of the most important indicators for forex and stock markets in the economic calendar.
Being released on the first Friday of each month by the Bureau of Labor Statistics (BLS), it shows the number of new jobs created by the US economy during the previous month, excluding farm sector, government and not for profit organizations.
NFP accounts for 80% of the US gross domestic product work force.

The non-farm payroll is used by analysts to determine the current state of the economy and to predict the future activity levels.
For that reason, its release usually triggers volatile movements across all Us Dollar related financial instruments.

Being crucially important, remember that NFP is not the only figure released by the Bureau of Labor Statistics.
NFP is the part of the Employment Situation Report that also contains:
Unemployment rate,
Average hourly earnings,
Labor participation rate,
Average workweek.

The main reason, why newbie traders fail in trading NFP release is the fact that they completely neglect the figures of the Employment Situation Report.

Here are some tips how to properly interpret the figures in the report:

1) Non-farm payroll numbers.
It reflects the new jobs' creation pace.
Higher than predicted rate is usually positive for the US stock market,
while the weak rate usually affects that negatively.

2) Unemployment rate.
It reflects the number of unemployed people in relation to a total workforce.
Low unemployment rate is usually very positive for US Dollar,
while higher than expected unemployment quite negatively affects on USD.

3) Average hourly earnings.
It reflects the change of the labor cost.
The fast increase in the labor cost is usually positive for US Dollar,
while the slowing increase is considered to be a bearish indicator for USD.

4) Average weekly hours.
It reflects the average amount of paid working hours.
The increase in average weekly hours is considered to be a very positive factor for US stock market,
while its decrease is considered to be a negative one.

Trading NFP report, the one should consider all the figures from the Employment Situation Report.
All the numbers should be weighed properly and only then the predictions should be made.
Remember that volatility is higher than usual in the hours of news release, for that reason, be careful and never forget to set a stop loss.