What it means
The figure comes from a survey of employers, who report how many people they pay. The headline number is usually the change in jobs since the previous month, such as an increase of 150,000 jobs.
The report also includes the unemployment rate, average hourly earnings and hours worked. Farm workers are excluded because farm employment is highly seasonal and would make the figure jump around.
The statistic also leaves out private household workers, employees of certain nonprofit organisations and military staff. Even so, it covers the large majority of the American workforce.
Why does it matter to a business? Employment is a leading clue to consumer spending, because people with jobs buy more.
A strong report suggests growing demand, tighter hiring markets and potentially rising wages, while a weak report points to slowing activity. Financial markets react quickly.
If jobs growth is stronger than expected, investors may expect higher interest rates from the central bank, since a hot labour market can push up inflation. Share prices, bond yields and currencies often move on the day of the release, which is typically the first Friday of the month.
The numbers are revised in later months as more survey responses arrive, so the first estimate is only a starting point. Seasonal adjustment, which smooths out regular patterns like holiday hiring, also affects what is reported.
Managers should treat one month's figure with caution and look at the trend over several months. Companies use the data in planning.
A retailer may adjust inventory orders, a recruiter may plan its hiring drives and a lender may revise its credit forecasts based on labour market conditions. The report gives a quick, widely shared view of the economy that sits behind many business decisions.
In practice
Real-world examples.
Example
A retail chain reads that the economy added 250,000 jobs in a month, well above forecasts. The finance team expects strong consumer spending and increases its inventory orders for the next quarter. It also plans to raise store wages to keep staff. She notes that tight labour markets also make hiring harder, so recruitment budgets may need to rise.
Example
A currency trader sees a weak jobs report that shows only 20,000 new jobs when 150,000 were expected. She expects the central bank to be less likely to raise rates, which could weaken the dollar. She adjusts her positions before markets open. Her view proves partly right, though the figure is revised the following month.
Example
A mortgage lender notes several months of falling payroll growth. It tightens its lending criteria slightly in anticipation of a slower housing market. Its risk team will review the position again after the next report. The lender will compare that report with its forecasts before deciding whether to tighten further.
Formula
Calculation
Monthly change in payrolls = current month employment - previous month employment
Suppose non-farm payroll employment was 158,000,000 last month and 158,120,000 this month. Monthly change = 158,120,000 - 158,000,000 = 120,000 jobs added. That is a monthly growth rate of 120,000 / 158,000,000 = about 0.08%.Case study
Seen in the real world.
Meridian Staffing is a fictional recruitment agency that tracked the monthly jobs report to plan its recruiters' workload. In this illustrative story, the report showed average growth of 200,000 jobs a month over six months, then dropped to 40,000. The agency's chief financial officer had a hiring plan based on continued strong growth.
She asked the team to compare the latest figure with revisions and the three-month average before acting. The following month's report revised the weak figure up to 90,000, though growth was still slower than before. The agency paused new recruiter hires for a quarter and kept the budget flexible, which saved about $400,000 compared with the original plan.
Meridian now reviews the report each month alongside its own placement data. The finance team keeps a simple chart showing the three-month average of payroll growth next to the agency's number of new vacancies. The chart helps the board see turning points earlier, and it prevents overreaction to a single month's figure.
Watch out
Common mistakes.
- Treating one month as the trend. The figure is volatile and often revised, so look at the average over several months.
- Assuming it covers every job. Farm, private household, some nonprofit and military workers are excluded.
- Ignoring revisions. Earlier months are often adjusted, which can change the story.
Questions
People also ask.
What does non-farm payroll measure?
The number of paid US workers, excluding farm workers and a few other groups, based on a survey of employers.
When is it published?
Usually on the first Friday of each month, as part of the US labour statistics agency's jobs report. Holidays can move the date by a day or two.
Why do markets react to it?
Because it affects expectations about the economy, inflation and interest rate decisions. A strong figure can raise expectations of higher interest rates, while a weak one can raise hopes of cuts.
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