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64. Trading the News - Non Farm Payrolls (NFP's)
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A lesson on Non Farm Payrolls and what traders need to watch for when trading and investing in the futures, forex, and stock markets.
Link to the BLS NFP Data Section:
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As there are so many things which can be measured in an economy, there are tons of economic releases every month, with new numbers coming out on almost a daily basis. With all this data it is easy to get overwhelmed when looking at the economic calendar and trying to determine what is important to us as traders. While the importance of different economic indicators to the markets changes depending on current economic conditions, there are approximately 10 major economic indicators that have and always will be important to the market. Most of the other data that is reported throughout the month is similar to one of these 10 indictors, so once we have an understanding of the main numbers everything else will make a lot more sense.
Before getting started here it is important to understand that economic releases are designed to try and give a picture of either:
1. What has already happened in the economy based on past numbers (referred to as a lagging indicator)
2. What is anticipated going forward based on past numbers. (referred to as a leading indicator)
3. What is happening right now based on current data. (referred to as a coincident indicator)
Economic indicators are designed to try and give a picture of the growth the economy is experiencing, the level of price increases or inflation that the economy is experiencing, or both.
One of the most important and therefore market moving economic numbers after GDP is the Non Farm Payrolls (NFP), which is released at 8:30 am on the first Friday of each month. Released by the Bureau of Labor Statistics the Non Farm Payrolls Number is meant to represent the number of jobs added or lost in the economy over the last month, not including jobs relating to the Farming industry. The Farming Industry is not included because of its seasonal hiring which would distort the number around harvest times as farms add workers and then release them after the harvest is complete for example
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