Non farm employment (NFP) is one of the most important and anticipated economic indicators in the United States, along with the consumer price index, gross domestic product, and purchasing managers' index. This index can reveal the situation of the world's largest economy, which in turn will have a direct impact on the global economy. But what exactly are NFPs, what do they measure, and how do they affect the market?

What is non farm employment data?

Every month, on the first Friday after collecting data, the Bureau of Labor and Statistics releases an NFP report. The Non farm Employment Report, also known as NFP, is a survey based report used to measure the number of employees in the United States. This report measures the number of American workers from various industries, excluding workers employed in agriculture, private households, homeowners, non-profit organizations, and military personnel.

In addition, the US Bureau of Labor and Statistics revealed that the employees included in this report account for approximately 80% of US companies, which contribute to the overall GDP rate of the United States. Therefore, traders and investors can refer to this economic indicator to measure the trajectory of the US economy, especially the global economy.

Why is non farm employment reporting important?

In addition to providing data reflecting the health of the US economy for traders, investors, and analysts, NFPs are also important as they can have a direct impact on the market. The decisions of the central bank, such as the Federal Reserve. For example, good NFP data indicating high employment rates may affect the Federal Reserve's interest rate decisions and lead to an optimistic overall market rise, and vice versa.

However, it is important to remember that a high employment rate does not always mean a healthy economy, as if the employment rate grows exponentially, it may lead to high inflation. Therefore, a high number of non farm workers may lead the Federal Reserve to raise interest rates to curb inflation, while a lower number of non farm workers may lead the Federal Reserve to take more measures. Gentle posture.

In addition, national focal points can be used to identify the most successful and healthy business sectors. Therefore, for example, if the NFP shows a decrease in employment in the technology industry, traders can use this to understand that the industry is performing poorly compared to other industries tracked in the NFP report. (Source: Investment Encyclopedia)

When will NFP be released?

The NFP is released by the United States Bureau of Labor and Statistics at 8:30 am Eastern Time on the first Friday of each month.

Which foreign currencies have the greatest impact on NFP?

In addition to having an impact on the overall market, NFP can also have an impact on foreign exchange currency pairs, especially those linked to the US dollar. Due to the fact that non farm employment data reflects the health of the US employment sector, they can directly affect the Federal Reserve's interest rate decisions, as higher employment rates can prompt the Federal Reserve to raise interest rates. Therefore, this can increase the strength of the US dollar and cause fluctuations in the foreign exchange market. On the other hand, a lower employment rate may indicate economic deterioration, which may weaken the attractiveness of the US dollar and make it less attractive to traders and investors.

Therefore, some foreign exchange pairs are most susceptible to changes in NFP data, such as EUR/USD (EUR/USD), AUD/USD (AUD/USD), USD/JPY (USD/JPY), and GBP/USD (GPBUSD). However, although the biggest impact may be on currency pairs related to the USD, the data may alter the trajectory of other currency pairs.

In addition, NFP can affect other market assets other than foreign exchange. Therefore, although high employment rates can strengthen the foreign exchange market, they will also lower the value indicators of the United States such as the S&P 500 Index and the NASDAQ 100. As for commodities, if the NFP is weak, indicating poor economic performance, then traders can choose to invest in safe haven assets like gold (XAU), which can bring about some commodity price increases.

How to trade non farm employment (NFP)?

Given that NFP requires the examination of complex data, there is no right or wrong way to integrate non farm employment (NFP) into your transactions. However, the most common methods include understanding the working principles and components of NFP, knowing when they are released, analyzing data and trading accordingly, and using risk management tools to protect oneself from volatility

What are the components of non farm employment?

A key part of understanding national focal points includes understanding the breakdown of their components. The NFP includes the overall employment rate in the United States, the average hourly wage of labor force members, detailed increase and decrease rates for specific employment sectors, and revisions to past NFP reports.

The upcoming 2023 NFP version

Some NFP versions to be released in 2023 include the following dates:

April 7th

May 5th

June 7th

July 7th

August 4th

September 1st

October 6th

November 3rd

December 1st

In summary, NFP is definitely an economic indicator that every trader, investor, analyst, and market observer should keep in mind when trying to better understand the health of the economy, as they may have a direct impact on the market.