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Crash Course to Become NFP Expert

Non-Farm Payrolls


NFP stands for Non-Farm Payrolls, which is actually part of the Employment Situation report, released by the US Department of Labor, which also includes the Labor Force Participation Rate, the Unemployment Rate, Average Hourly Earnings and Average Workweek Hours, among many other statistics. The NFP component seems to get the most attention because it measures the actual number of paid employees (full and part time) in the business and government establishments.
The report provides a fresh insight into the health of the U.S. economy in general, and the labor-market conditions in particular. If the labor market is growing, that means more people are making money, and the more spending there will be. More spending results in a higher Gross Domestic Product which is the broadest measure of the economy. Employment figures can also have an impact on interest rates, as higher employment will lead to higher interest rates because of central bank policies aimed at balancing inflation with growth. And as you probably know, interest rates are a significant factor for Forex traders.

The NFP measures the number of jobs created or lost in the U.S. economy over the prior month. For instance -200k means 200k jobs were lost in all non-agricultural business. A look at the history of NFP releases is a good starting point to get a feel for the jobs situation.

Try to detect the long-term trend in the NFP figures, if it is rising of falling. After a large string of good numbers, for instance, a retracement would be plausible. Look also at the ranges: were recent reports close to historic highs or lows? The chart below, taken in June 2017, shows a weakening trend made of lower highs.

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