US Non-Farm Payrolls Overview

Overview

This lecture explains the significance, structure, and impact of the US Non-Farm Payrolls (NFP) report as a key monthly indicator of economic health.

NFP measures monthly job gains or losses in the US economy, excluding farm workers.
It is called "non-farm" because farming jobs are highly seasonal and data is inconsistent.
Farm jobs are excluded due to volatility, weather dependence, and prevalence of family-run operations.
The report covers approximately 80% of US workers.

Goods-producing industries: construction, manufacturing (durable and non-durable goods), mining, oil, and gas.
Service-providing industries: retail, transportation, utilities, information, tech, finance, business services, education, health, leisure, and hospitality.
Government employment: federal, state, and local jobs, including teachers and university staff.
"Other services": repair shops, salons, and nonprofits.

NFP acts as an economic health indicator—job growth signals expansion; weak reports signal possible slowdowns or recession.
Influences Federal Reserve interest rate decisions: strong job growth may lead to rate hikes, weak growth may prompt cuts.
The report moves financial markets (stocks, bonds, currencies) immediately upon release, usually the first Friday of each month at 8:30 am ET.

The "establishment survey" collects payroll data from about 120,000 businesses and agencies.
The "household survey" asks 60,000 US households about employment status and determines the unemployment rate.
NFP tracks the number of jobs; the household survey tracks employment status of people.

NFP figures are often revised after the initial release as more data is reported.
Annual "benchmark revisions" use tax records to correct previous totals.
The survey methodologies are consistent, transparent, and reviewed by statisticians.

NFP influences borrowing costs for individuals (mortgages, car loans, credit cards) via interest rates.
Data guides government policy on stimulus, taxes, and spending.
Affects stock market performance and retirement accounts.

Non-Farm Payrolls (NFP) — Monthly measure of US jobs excluding farm work, widely used as an economic indicator.
Establishment Survey — Survey of businesses to count total jobs (basis for NFP).
Household Survey — Survey of households to assess employment status and calculate unemployment rate.
Benchmark Revision — Annual reconciliation of survey data with tax records for accuracy.
Federal Reserve (Fed) — US central bank that uses NFP data to guide interest rate policy.

Review upcoming NFP reports and observe related financial market reactions.
Optional: Reflect on whether NFP adequately represents labor market complexities.