Use US Employment Statistics to Forecast Market Trends

What to Look for in US Employment Statistics?

The US employment statistics are indicators of the employment situation in the United States and they are released by the U.S. Bureau of Labor Statistics on a monthly basis. The report includes several figures and it is categorized as follows:

・Unemployment rate
・Non-farm payroll employment
・Construction employment
・Manufacturing employment
・Retail trade employment
・Financial employment
・Average weekly hours
・Average hourly earnings

Among these figures, unemployment rate and non-farm payroll employment attract investors’ attention. The unemployment rate shows the percentage of unemployed people in the labor force. The non-farm payroll employment measures the changes in the number of non-farm paid employees. In short, by looking at the statistics, it is easy to keep track of how many people are employed in the United States.

In particular, the non-farm payroll employment, excluding private household employees and farm employees, accounts for approximately 47 million employees in about 400,000 firms. Because the figure covers around one third of the workers in the United States, it is said that non-farm payroll employment is the most important economic indicator among the employment statistics.

The employment statistics attract people’s attention. This is because that personal consumption, which is greatly influenced by the employment situation, represents more than 70% of the US GDP. When there is a big difference between the expectations and the released data, there will be large movements in the market. It is thus very necessary to pay attention to it.

Release Date of US Employment Situation Report and Time for Trade

The US employment situation report is released on the first Friday of each month at 8:30 a.m. EST. It’s no exaggeration to say that it is the most important indicator among all the economic indicators in the world. When the report is released, there tends to be large movements in the foreign exchange market and the stock market. Because non-farm payroll employment and unemployment rate can have a great influence on the monetary policy made by the FOMC, these two figures have received most attention.

As it is mentioned above, the statistics have great influence on the market movements and it attracts people’s attention. Sometimes, the effects can last for 3 business days after the employment situation report is released.

In the foreign exchange margin trading, while investors can make a big profit, there is also a chance to lose investments. In the binary options trading, due to the risk is pre-determined, when the employment situation report is released, it can be said that this is a good chance to place trades.

Why Does Non-farm Payroll Employment Receive Most Attention?

Why does the US non-farm payroll employment attract people’s attention? The reason for this is simple: people cannot make a living and cannot purchase anything without a job. Employment situation has the most important impact on the personal consumption, even though it can also be affected by taxes and weather. When people are employed and receive wages, personal consumption will increase and the US economy will grow.

If the number of employed persons increased by 10,000 compared with the prior month and each of them got a salary of 2,000 dollars, the income of all workers will increase by 20 million dollars in total, which can lead to increase in personal spending. Therefore, by examining this economic indicator, it is able to understand the US economic situation in the future.

The data includes non-farm workers. This is because that farm works are seasonal jobs and employees work at certain times of the year. In order to accurately examine the current economic conditions, seasonal factor is excluded. In this way, one can make a judgment by saying that because the economy is growing, the number of employed people has increased.

Especially, compared with other countries, people in the United States tend to show more changes in the employment situation as there is not long-term employment. Therefore, in many cases, the released data is either higher or lower than the expectations.

In short, the big difference between released data and expectations can lead to large movements in the market. It is an indicator that has a great impact on the currencies against US dollar, just like the GDP and FOMC. Therefore, it is essential to take a close look at it.

Use US Employment Statistics as a Trading Strategy

It is essential to look at the non-farm payroll employment and unemployment rate. Due to the fact that unemployment rate is not in line with the current economic conditions, foreign exchange market participants pay close attention to the changes in non-farm payroll employment.

When you look at the US employment statistics, you can refer to the following process to analyze the changes in the number of non-farm employment.

The number of non-farm employment increases

The demand for labor increases

When the demand for labor increases, the average wages increase

When the demand for labor and average wages increase, personal spending rises

The increase in personal spending can lead to inflation

Due to inflation, FOMC is likely to raise interest rates

This can lead to an increase in buying US dollar

The way to examine non-farm payroll employment is shown as above. The decrease in the number of non-farm employment can lead to selling of US dollars. The data is compared with that of the previous month to measure the changes in the number of employees.

However, due to seasonal factors, such as job hunting seasons and increase in seasonal workers, it cannot simply compare the data with that of the previous month. In addition, as for the influence on the financial policies, although employment statistics are very important indicators of economic conditions, it is also necessary to pay attention to the consumer price index (CPI) and producer price index (PPI).

Twitter 0

facebook 0