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Economic Events: Non Farm Payroll

The Non-Farm Payroll report is used to track the payroll of any job in the US with the exception of farm workers, private household employees or non-profit organization employees. The report is released monthly on the first Friday of the month.

Why is the Non-Farm payroll important to traders?

The non-farm payroll report contains a wealth of important data. The most significant being the total number of paid U.S. workers of all business not including the exceptions mentioned above. For this reason, the non-farm payroll report is closely monitored due to its role in helping analysts predict inflation as well as economic growth.

As traders, the main thing we are looking for is the contrast between the actual and the expected numbers. This will determine the level of volatility the report will have on the market.

The following are some of the strengths of the non-farm report

  • Currency traders: Because of the nature of the Non-Farm Payroll data, this event effects all currency markets and is one of the most important news events especially for EUR/USD traders.

  • Volatility: The NFPR often has a heavy impact when it releases, especially on currency markets. This makes it great for trading however unless you have a solid strategy in place it is suggested you wait out the initial volatility.

  • Direction: The Non-Farm Payroll report releases at 8:30 AM EST and is usually accompanied by a large initial push either long or short depending on the data from the report. Usually, this push will set the overall direction of the market for the day and many traders will form strategies around this.

Final Word

The Non-Farm Payroll report can be a powerful tool for traders. The initial report usually provides good volatility and can push certain markets in new directions. However new traders should be careful when trading this news event because of the initial volatility it usually produces.

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