What is Non-Farm Payroll (NFP)?

If you follow financial markets, you’ve probably heard traders and analysts talk about Non-Farm Payroll (NFP). It’s one of the key economic reports, released monthly by the U.S. Bureau of Labor Statistics (BLS). 

The report shows how many jobs were added or lost in non-farm sectors, giving investors, policymakers, and traders insight into the strength of the U.S. labor market.

Why does this matter? Because job growth is directly tied to consumer spending, inflation, and general economic performance. Let’s break down what NFP is, why it’s important, and how it influences asset prices.

Introduction to Non-Farm Payroll

Non-Farm Payroll (NFP) is an economic indicator that tracks the number of jobs added or lost in the U.S. labor market, excluding certain sectors like farming, private households, and nonprofit organizations. The Bureau of Labor Statistics (BLS) releases this report on the first Friday of each month, providing a summary of employment trends and business activity.

It’s tracked by investors because a rising payroll figure usually signals expansion, while a decline may indicate economic trouble. Policymakers, traders, and investors use this data to estimate the health of the economy and predict potential shifts in monetary policy.

Components of the NFP Report

The Non-Farm Payroll report provides more than just the number of jobs added or lost. It includes several key details that help analysts and traders understand the broader employment picture. Here are the main components:

Total Non-Farm Employment Changes

This is the headline number that shows how many jobs were created or lost in the previous month. A high figure usually shows economic growth, while a lower number tends to signal a slowdown.

For example, in January 2025, the U.S. economy added 143,000 jobs, which was below the predicted 169,000. This decrease in job creation led to a mixed reaction in financial markets, with some investors expressing concerns about economic momentum.

Breakdown by Industry Sectors

The report categorizes job gains and losses across various industries, like manufacturing, construction, healthcare, retail, and financial services. This breakdown helps identify which sectors are expanding and which may be struggling.

In December 2024, notable sectoral changes included:

• Retail Trade: Added 43,000 jobs, rebounding from a loss of 29,000 jobs in November. This growth was primarily driven by increases in clothing and accessories stores, general merchandise retailers, and health and personal care retailers.
• Manufacturing: Experienced a decline of 13,000 jobs, indicating potential challenges in the industrial sector during that period.

Average Hourly Earnings

Wage growth is an important factor in assessing inflation. If wages are rising, consumers have more spending power, which can lead to higher demand and potential price increases. The Federal Reserve observes this figure when making interest rate decisions.

In January 2025, average hourly earnings increased by 0.5%, suggesting that workers were earning more compared to the previous month. Such wage growth can influence inflation expectations and monetary policy strategies.

Average Workweek Hours

This data shows the average number of hours worked per week across industries. A decline in work hours might indicate reduced business activity, while an increase suggests a stronger demand for labor.

Each of these components contributes to how markets interpret the NFP report, influencing everything from stock prices to currency movements.

Release Schedule and Data Collection

NFP report is released on the first Friday of every month at 8:30 AM Eastern Time by the U.S. Bureau of Labor Statistics (BLS). So, it provides employment data from the previous month.

Since the release happens before U.S. stock markets open, traders and investors react quickly, leading to sharp price movements in forex, stocks, and bond markets. The report’s timing aligns with other major employment indicators, such as the ADP Employment Report and Initial Jobless Claims, which help analysts form expectations ahead of the NFP release.

Overview of the Data Collection Process by the BLS

The BLS gathers NFP data through the Current Employment Statistics (CES) survey, which collects responses from around 131,000 businesses and government agencies, covering approximately 670,000 worksites across the U.S.

How Data is Collected:

• The survey is conducted monthly and focuses on payroll records from businesses, ensuring accurate employment statistics.
• The reference period is usually the pay period that includes the 12th day of the month, meaning the January 2025 report reflects job data from December 6–12, 2024.
• The BLS adjusts the raw data for seasonal fluctuations, such as holiday hiring or temporary job layoffs, to provide a clearer picture of employment trends.

Interpreting NFP Data

NFP report is more than just a headline number. Market reactions often depend on how the actual data compares to expectations, how previous reports are revised, and how the numbers align with other economic indicators.

Understanding Deviations from Forecasts

Before each NFP release, analysts, economists, and financial institutions publish expectations based on leading employment indicators. The market reacts not only to the actual NFP figure but also to how much it deviates from forecasts.

Role of Revisions in Previous Data

The initial NFP report is often revised in the following months as the Bureau of Labor Statistics (BLS) gathers more data from businesses. These revisions can considerably impact market sentiment, especially if they change the broader employment trend.

Why Revisions Matter:

• Upward revisions: Indicate the labor market was stronger than initially reported, which can stimulate investor confidence and lead to positive market reactions.
• Downward revisions: Suggest the economy was weaker than previously thought, which may weigh on the U.S. dollar and stock market sentiment.

Correlation with Other Economic Indicators

Traders and analysts compare NFP with other economic reports to get a better understanding of the economy.

Key Indicators to Watch:

• Unemployment Rate: Measures the percentage of unemployed workers actively seeking jobs. A falling unemployment rate with a strong NFP suggests a growing economy.
• Average Hourly Earnings: If wages are rising along with job growth, inflation concerns may increase, influencing Federal Reserve policy.
• Initial Jobless Claims: Released weekly, this report tracks new unemployment claims. A rising trend in jobless claims before an NFP release could signal a weaker labor market.
• ISM Manufacturing & Services PMI: Business surveys that assess economic conditions. A weak ISM report before the NFP release may hint at slower hiring trends.

Importance of NFP in Financial Markets

Since employment data reflects economic strength, investors use NFP results to adjust their strategies based on how the report compares to expectations.

Impact on Currency Markets (Forex)

Forex traders keep an eye on the NFP data because job growth directly affects expectations for Federal Reserve policy and interest rates. Since the USD is the world’s reserve currency, any deviation from forecasts can cause sharp moves in major currency pairs.

How Forex Pairs React to NFP

1. Strong NFP: USD rallies, as traders expect higher interest rates. Example: EUR/USD declines as the dollar strengthens against the euro.
2. Weak NFP: USD weakens, as the Fed may adopt a more dovish stance. Example: GBP/USD and AUD/USD rise as traders move away from the dollar.
3. In line with expectations: Muted reaction, but traders analyze wage growth and revisions for further insights.

Influence on Stock Markets

U.S. equities tend to react sharply to NFP, but the direction isn’t always straightforward. It depends on how traders interpret the data in the context of interest rates and economic growth.

Stock Market Scenarios

1. Strong NFP & rising wages: Negative for stocks, as higher rates could pressure corporate earnings.
2. Strong NFP but stable wages: Bullish for stocks, as job growth supports economic expansion without inflation fears.
3. Weak NFP: Stock market drops, unless weak data increases the likelihood of Fed rate cuts.

Effect on Bond Markets

Bond traders use NFP data to get an idea of future Fed decisions. Since bond yields move opposite to prices, strong NFP numbers often lead to higher yields, while weak data can push yields lower.

How Bonds React to NFP

1. Strong NFP: Higher bond yields. Investors sell Treasuries, expecting the Fed to tighten policy.
2. Weak NFP: Lower bond yields. Investors buy Treasuries, seeking safety in case of an economic slowdown.

Reactions in Commodity Markets, Especially Gold

Gold traders follow NFP closely because the metal often moves opposite to the U.S. dollar and bond yields. Strong job data weakens gold, while weak reports often boost demand for safe-haven assets.

1. Strong NFP: Gold prices fall. Higher rates increase the opportunity cost of holding gold.
2. Weak NFP: Gold prices rise. Economic uncertainty improves safe-haven demand.

Trading Strategies Surrounding NFP Releases

Traders prepare for the release in different ways, depending on their risk tolerance and trading style. Some position themselves before the announcement, while others wait for the initial volatility to settle before taking trades.

Pre-Release Market Positioning

Before the NFP report is released, traders assess market expectations and sentiment to predict possible moves. Many traders avoid opening large positions right before the event.

Example positioning:

In December 2024, analysts expected 170,000 new jobs, but leading indicators suggested a weaker number. Traders expecting a lower NFP positioned short on USD/JPY, which later benefited from a weaker dollar after the actual report showed only 143,000 jobs.

Post-Release Volatility

Once the NFP report is released, the market reacts within seconds, leading to sharp movements in forex, stocks, and commodities. 

The first reaction to NFP is often overdone, leading to a quick pullback before the market picks a direction. Traders wait for the initial volatility to settle, then enter trades based on technical levels and market sentiment.

If the report confirms strong momentum, traders enter positions in the breakout direction once volatility stabilizes.

Example:

In January 2025, the NFP report showed strong wage growth (0.5%), even though job creation was below expectations. Initially, gold spiked up, but as traders digested the wage inflation impact, the USD rebounded, causing gold prices to reverse lower.

Limitations and Considerations

Traders and analysts must be aware of potential data revisions, seasonal distortions, and external factors that can affect job numbers.

Potential for Data Revisions

The initial NFP release is only an estimate based on the data available at the time. Over the next two months, the Bureau of Labor Statistics (BLS) revises the numbers as more businesses submit payroll data.

Example:

In December 2024, the initial NFP report showed 170,000 jobs added, but in January 2025, the number was revised down to 143,000. The downward revision shifted market sentiment, causing a delayed selloff in the USD and a rebound in gold prices as traders reconsidered economic strength.

Seasonal Adjustments and Anomalies

Employment numbers naturally fluctuate throughout the year due to seasonal trends, such as holiday hiring, back-to-school shopping, or summer tourism jobs.

Example:

In November 2024, retail jobs surged by 43,000 due to early holiday hiring, inflating the headline NFP number. However, traders understood this was a seasonal increase, not a sign of long-term job growth. By January 2025, retail jobs declined, showing the temporary nature of the gains.

External Factors Influencing Employment Data

Don’t forget to consider these factors:

• Natural disasters and weather events,
• Geopolitical issues,
• Government shutdowns,
• Global economic trends,
• Pandemics and health crises.

FAQs on Non-Farm Payroll

What is Non-Farm Payroll (NFP) and what does it measure?

NFP is a key economic indicator released monthly by the Bureau of Labor Statistics (BLS). It tracks the number of jobs added or lost in the U.S., excluding farm workers, private households, non-profits, and military personnel. The data reflects employment trends in non-agricultural sectors.

Why is the NFP report important for the economy and traders?

NFP shows job growth, which affects consumer spending, economic growth, and inflation expectations. For traders, it can cause high volatility in forex, stocks, and commodities. A strong report often strengthens the U.S. dollar and equities, while a weak report may signal economic trouble.

When is the NFP report released?

NFP is released on the first Friday of each month at 8:30 AM Eastern Time (ET) by the BLS. The timing is important because markets react immediately.

What sectors are excluded from NFP data?

The NFP report excludes the following sectors:

• Farmworkers,
• Private household employees,
• Self-employed individuals,
• Non-profit organization employees,
• Military personnel.

What other components of the NFP report matter?

Beyond the headline number, traders analyze:

• Average hourly earnings: Signals wage growth and inflation risks.
• Average workweek: Reflects labor demand.
• Industry breakdown: Shows which sectors are hiring or cutting jobs.

Where can I find the latest NFP data?

You can find the latest NFP reports on the Bureau of Labor Statistics (BLS) website. Platforms like FRED (Federal Reserve Economic Data) and economic news sites also provide updates and historical data.