The “Nonfarm Payrolls” is an economic statistic published every month by the Bureau of Labor Statistics which is part of the United States Department of Labor.

This is a very important economic indicator for the US economy and it measures the change in the number of people employed during the previous month, It excludes the farming industry – hence the title of ‘nonfarm’. The reason why this figure is closely watched by all market participants is because job creation is deemed to be the foremost indicator of consumer spending, and consumer spending accounts for the majority of economic activity. The whole world takes notice of this figure because of the fact that the US economy is the largest in the world.

A higher than expected reading should be taken as positive (or bullish) for the US stock markets and the US Dollar, while a lower than expected reading should be taken as negative (or bearish) for the US stock markets and the US Dollar.

For example, the figure for 3rd July 2014 came in at a positive 288,000 new non-farm jobs being created.

This was ahead of the June 2014 figure of 224,000 new nonfarm jobs and was also ahead of consensus forecasts of 212,000 for July.

So in this case, the July figure came in ahead of the previous month and also ahead of forecast. This should therefore translate into bullish news for the US Stock Markets and US Dollar. The stock markets did indeed react positively – the Dow Jones Industrial Average jumped over the 17,000 level for the very first time and closed above that level during the July 4th Independence Day holiday.

During the hour of the release, the EURUSD fx rate fell from 1.3650 to 1.3600 – a positive sign for the USD Dollar.
The USDJPY fx rate rose from 101.9 to 102.2 – again a positive sign for the USD Dollar.

 

This is an important statistic to keep your eye on.