The non-farm payrolls measure the number of people currently in employment in the US and are released along with the US unemployment rate. Both are important yardsticks used by traders and analysts alike to get an insight into the health of the US economy. Specifically, the non-farm payrolls measure the number of people in employment in all businesses across the country, excluding agricultural, local government, private household and not-for-profit sectors.
The non-farm payrolls are considered to be one of the most robust measures of the health of the US economy, as they can give an insight into future important data releases such as gross domestic product ('GDP') figures and manufacturing data. This is because the higher the number of people in employment in a country, the better its economic output can be expected to be at the end of the quarter and vice versa.
For instance, consistently falling non-farm payroll figures could indicate weakness and the risk of a possible recession, whereas consistently robust data on a month-on-month basis could show a strengthening economy, possibly even indicating that the economy may be out of danger of falling into a recession.
Analysts release forecasts ahead of the release of the non-farm payrolls announcement, indicating a predicted number. When the payroll figures come in above expectations, or miss estimates on their release, it could take the markets by surprise and have a positive or negative impact on the US dollar and headline indices such as the Dow Jones Industrial Average. For instance, a better-than-expected NFP release could push the US dollar higher against other currencies, whereas lower-than-expected data may put pressure on the value of the US dollar against a basket of other currencies such as the euro, sterling or yen. It is for this reason that trading the non-farm payrolls can form an important aspect of your spread betting or CFD trading strategy.