Must-see transactions: 9 important economic data
What is the non-farm payroll data report?
The U. S. non-farm payrolls report is one of the most important economic data that traders focus on every month. The data is important to traders because it shows job growth in the United States.
First of all, it is necessary to analyze the major changes in previous US non-farm payrolls data. Traders can compare the actual data with the median estimate and the upper and lower limits, which is also useful for understanding the unemployment rate.
Other data to watch before the non-farm payrolls data are released may include:
● Weekly unemployment data
Changes in ● ADP employment data
Employment portion of ● monthly ISM and PMI data
With a few exceptions caused by market holidays, non-farm payrolls data are released on the first Friday of each month at 8:30 eastern time.
Interpretation of the report
The report itself is so extensive that most traders look at only two or four key pieces of information.
The first thing traders focus on is the headline data. When the actual data are released, the market will fluctuate based on whether the actual job creation increases or decreases compared with the expected figure.
Because of the scale and complexity of the data, the headlines of the non-farm payrolls report in the first few months tend to be significantly revised. The Bureau of Labor Statistics also revised the data from the previous month, which is called a two-month net revision.
Another important figure is the unemployment rate, that is, the percentage of the total unemployed labour force who are actively looking for work. The increase in unemployment is relatively small compared with the headlines, and even a small rise or fall of 0.2 per cent is often seen as a big change.
In addition, Fed decisions tend to take into account large fluctuations in wage inflation and monitor man-hour data during the reporting period for changes or anomalies.
There are many factors to consider when trading using the US non-farm payrolls data report, but with some insight and careful preparation, investors can find many trading opportunities.
Source of course: CME