U.S. Non-Farm Payrolls - Explained

U.S. Non-Farm Payrolls - Explained

5 October 2017, 13:28

Experienced or novice in the trading field, everyone heard about Non-Farm Payrolls or NFP. If you have experience, you already know what could be the impact on a short or medium term of this event; but if you just started, maybe it would be useful to learn more about it. Non-Farm Payrolls, as the name says, represents the total number of Public jobs added in the U.S. in the previous month excluding Farming sector. The Farming sector is excluded due to its seasonality, which will alter the general view of the Public employment evolution. Federal Reserve, the US "Central Bank" (in fact privately control), has a dual mandate: the first one is to achieve the 2% Inflation target; the second one is to achieve "maximum employment". So, as you can understand, NFP is extremely important not only because employment is one of the pillars of a healthy (or poor) economy, but also because it has a high influence over future monetary policy changes of Fed, leading to an increase or decrease of key interest rate.

The event itself is every First Friday of the Month (except when it is any Public Holiday in the U.S., in which case it will be on the second Friday of the Month) at the same time (12:30 PM GMT). The assets affected by this event are all USD related pairs, Gold and Silver. Another aspect of this event is that there is not one, but 3 key indicators released at the same time: Non-Farm Payrolls, Unemployment Rate and Average Hourly Earnings (Wages). That's why it is as unpredictable as it is volatile. In the rare situations when all the indicators are either positive or negative, we can see high movement in these pairs, but most of the time the results are mixed and it is relatively hard to predict the direction of the assets. Nevertheless, NFP opens a lot of trading opportunities, especially for short, but also for medium and long-term, when gives some indications about possible changes in Fed monetary policy decisions.

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