What is Non-Farm Payroll (NFP)?

What is the Non-Farm Payroll (NFP)?

Non-farm payrolls are monthly statistics showing the change in the employees’ number for the previous month. They may also be known as non-farms or NFPs. The NFP gets its name from jobs that aren’t included: agricultural workers and those employed by private households or non-profit organizations.

The data is usually released on the first Friday of any month and can significantly impact multiple markets. Check еconomic calendar in order not to miss it. The NFP consists of three parts of news releases:

NFP numbers: how many new jobs were created/lost

Unemployment rate: total unemployment rate

Average Hourly Earnings: change in the price that enterprises pay for labor.

Why is it important?

For the Federal Reserve, employment is a huge factor to rely on. When employment is high and in good economic health, politicians pursue a contractionary monetary policy with high interest rates. Thus, if the unemployment rate is higher than usual, the economy is considered to be operating below its potential and politicians will try to stimulate it. An expansionary monetary policy entails lower interest rates and lowers the demand for the dollar (money flows out of the low-yield currency).

For Forex traders, NFP is definitely an occasion. They follow it to see how the USD pairs (EURUSD, AUDUSD, USDJPY, USDCHF, GBPUSD, and others) react. Gold is also a popular asset to trade on NFP results.

Let’s see how volatile Forex market can be after the NFP release. The expected NFP results as of January 7, 2022 were 426,000 (jobs added), the actual result was disappointing with only 199,000 jobs added. As a result, volatility increased, and the dollar index lost around 500 points.

How to trade on NFP release?

If NFP is higher than expected, the USD will rise. If NFP is lower than expected, the USD will fall. The unemployment rate situation is the opposite: the lower the indicator, the better for the US currency.

Subscribe to the FBS Analytics YouTube channel to trade on the NFP release with market experts.

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2023-11-10 • Updated

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