The non farm payroll
The non farm payroll
The non-farm employment change, also known as non-farm payrolls (NFP), measures the change in the number of employed people in the U.S., excluding the farming sector. It’s a key economic indicator that provides insights into the health of the labor market and the overall economy.
Key Points about Non-Farm Employment Change
- Measurement: It represents the net change in the number of jobs added or lost in the economy over the last month.
- Exclusions: The data excludes farm workers, private household employees, and non-profit organization employees.
- Importance: It's closely watched by financial markets as it provides a snapshot of economic activity and labor market conditions.
Latest Data
As of the latest report, the U.S. economy added 146,000 jobs in November 2024, falling slightly below expectations of 150,000. This was a decrease from the 233,000 jobs added in October 2024.
Why FOMC worries about NFP?
The Federal Open Market Committee (FOMC) closely monitors the Non-Farm Payroll (NFP) data for several reasons:
- 1. Labor Market Health: NFP data provides a comprehensive snapshot of the labor market, including job creation and unemployment rates. This helps the FOMC assess the overall health of the job market.
- 2. Inflation Indicators: Strong job growth can lead to higher consumer spending, which can drive up prices and contribute to inflation. Conversely, weak job growth can signal economic slowdown, affecting inflation.
- 3. Monetary Policy Decisions: The FOMC uses NFP data to make informed decisions about monetary policy, including interest rates. If the labor market is strong, the FOMC might consider raising interest rates to prevent inflation. If the labor market is weak, the FOMC might consider lowering interest rates to stimulate job growth.
- 4. Economic Projections: NFP data contributes to the FOMC's economic projections and forecasts. Understanding labor market dynamics helps the FOMC set realistic targets for economic growth and stability.
Impact on Financial Markets
- Stock Market: Strong job growth can boost investor confidence, leading to increased investment in stocks and potentially driving up stock prices. Conversely, weaker job growth can cause stock prices to fall as it may indicate a slowing economy.
- Bond Market: Higher employment can lead to higher inflation expectations, causing bond prices to fall and yields to rise.
- Currency Market: A robust job market can strengthen the U.S. dollar as it signals a healthy economy, attracting foreign investment.
- Commodity Markets: Higher employment can increase demand for commodities, driving up prices.
What do we expect?
After a long rally post trump election, USD entered into a correction phase as signaled by USDIDX. If the numbers don’t meet the expectation, dollar will further weaken and push dollar quote currencies up, commodity prices will go up as well. Dollar based currency pairs fall down.
Key factors
- Releasing authority: U.S. Department of Labor
- Date and time: 06th Dec 2024, 08:30 AM eastern, 07:30 Central, 01:30 PM GMT;
- Previous data: 12K
- Impact: weaking dollar to rally usd quote pairs, base pairs fall, equity markets correct.