The Non-Farm Payroll (NFP) report refers to the number of jobs created in the non-agricultural sector of the United States during a one-month period. In the US economy, NFP is a crucial economic indicator, often considered the most significant economic indicator influencing markets, including the Forex market. NFP data is typically released on the first Friday of every month at 8:30 AM New York Time (which is 5:00 PM Iran time). This figure represents the total number of jobs added, excluding the agricultural sector, government employees, household workers, and employees of non-profit organizations, during the calendar month before its release.
Components of NFP You Should Know:
The NFP index consists of various components, and understanding these components provides valuable information for traders. In this regard, we will examine its most important components together.
The most important indices within the NFP are:
. Change in Non-Farm Payrolls
. Unemployment Rate
. Average Hourly Earnings
. Labor Force Participation Rate
. Change in Private Payrolls
Reasons for the Importance of the US NFP:
The size of the US economy in the world:
The US economy is the largest in the world, and many global markets rely on its performance. The employment situation in the US can be indicative of the overall global economic condition, as the US is one of the world’s largest consumers of goods and services. Any changes in the US labor market can have a wide-ranging impact on the economies of other countries and global financial markets.
Federal Reserve monetary policy
The Federal Reserve (the US central bank) closely monitors the NFP report and uses it to make decisions about monetary policy, such as setting interest rates. US monetary policy has a direct and significant impact on the value of the dollar. Since the US dollar is considered a global reserve currency, any changes in US interest rates and monetary policy can have wide ranging effects on the financial markets of other countries.
Impact on international financial markets
The NFP directly impacts global financial markets, including the forex market, stock markets, and commodity markets. Investors and traders worldwide pay close attention to this report, and any changes in US employment can cause significant fluctuations in these markets.
Impact of the NFP report on gold
Gold is considered a safe-haven asset, and demand for gold often increases when there is increased uncertainty in the markets.
The impact of the NFP report on gold can be as follows:
If the NFP is better than expected, it indicates US economic growth. Consequently, the value of the dollar increases, and the demand for gold decreases as investors shift towards riskier assets with higher returns. Therefore, the price of gold may decline.
If the NFP is weaker than expected, it can raise concerns about the US economic recession. Consequently, demand for gold as a safe-haven asset increases, and the price of gold experiences significant growth.
Impact of the NFP on the US stock market
NFP data is one of the important indicators in the U.S. economy because it reflects the health of the country’s labor market. If the NFP data is reported above expectations, it indicates a healthy U.S. economy and is usually considered a sign of stronger economic growth, which can lead to an increase in stock prices. Conversely, if this data is reported below expectations, it may raise concerns about an economic recession and cause stock prices to decline.
It is better not to have open trades during the release of important statistics such as NFP data. This is because the data can be released in any direction, and the heightened market volatility at the time of the news release increases the risk of trading.