What is Non-Farm Payroll
The non-farm payrolls report is one of the most-anticipated economic news reports in the forex market. It is published the first Friday of the month at 8:30 AM Eastern time by the U.S. Bureau of Labor Statistics. The data release actually includes a number of statistics, and not just the Non-Farm Payroll (which is the change in the number employees in the country, not including farm, government, private and non-profit employees). Another metric included in the data release is the unemployment rate.
As one of the most-anticipated economic news events of the month, currency pairs (especially those involving the US dollar) typically see big price movements in the minutes and hours after the data is released.
This makes it a great opportunity for day traders with a sound strategy to take advantage of the volatility. Below is a step-by-step forex strategy for trading the Non-Farm Payroll report.
Non-Farm Payroll and the Economy
There are three parts and news releases for each Non-Farm Payroll day:
- 1. The Non-Farm Payroll numbers: how many new jobs have been created/lost
- 2. The unemployment rate: the overall unemployment rate
- 3. The hourly wages: how much workers are earning on average
The Non-Farm Payroll provides information about the US labor market, how well the economy is doing and what the future holds: if the economy is not doing so well, companies don’t hire as many new people and might even fire some of their employees. Subsequently, those people lose income and can’t spend their money on things which reduces the overall revenue and general consumer spending and slows down the economy further.
On the other hand, when the economy is doing well, companies hire new employees who now have more money available and can use their additional income to buy ‘things’ and boost the economy, further increasing the need for companies to hire more people to meet the demand.
On the other hand, when the economy is doing well, companies hire new employees who now have more money available and can use their additional income to buy ‘things’ and boost the economy, further increasing the need for companies to hire more people to meet the demand.