Understanding Nonfarm Payroll: The Core of U.S. Employment Data
The nonfarm payroll measures the number of workers in the United States, excluding those in farming, private households, proprietors, non-profit employees, and active military service members. Collected and reported monthly by the Bureau of Labor Statistics (BLS), these figures offer a crucial mirror to the state of the U.S. economy.
Key Insights to Absorb
- Nonfarm payrolls comprise around 80% of all U.S. workers, barring several specific categories such as farm workers and active military members.
- The monthly Employment Situation report by the BLS includes nonfarm payroll data and is split into two essential surveys: the Household Survey and the Establishment Survey.
How Nonfarm Payroll Data Shapes Economic Understanding
The Components of Nonfarm Payroll Information
Nonfarm employee classifications cover 80% of the U.S. business sectors that drive the country’s GDP. Together with excluding farm workers, these categories also do not count:
- Certain civilian government employees, specifically excluding high-security roles and certain agencies.
- Active military service personnel.
- Private household employees and domestic workers.
- Unincorporated business owners, such as sole proprietors operating without recognized business stature.
- Employees of non-profit organizations.
Dissecting the Employment Situation Report
Released on the first Friday every month, the Employment Situation report derives its substance from two detailed surveys – the Household Survey and the Establishment Survey.
Household Survey
This part of the report highlights critical metrics such as:
- The overall unemployment rate.
- Unemployment rates segregated by gender, race, education, and age.
- Reasons affecting unemployment figures.
- Participation rates in the workforce.
Participation Rate Explained
The labor force participation rate quantifies the active workforce by dividing the number of individuals aged 16 and older who are employed or actively seeking jobs by the total non-institutionalized, civilian working-age populace.
Establishment Survey
Bookmarking nonfarm payroll additions, the Establishment Survey details:
- Number of total nonfarm payrolls added by entities for the reporting month.
- Nonfarm payroll changes by industry categories such as durable goods, non-durable goods, services, and government sectors.
- Detailed accounts of hours worked and average hourly earnings.
Nonfarm Payroll Data: A Pillar of Economic Evaluation
Economists and policymakers utilize nonfarm payroll data, along with unemployment rates, to assess economic health and predict future economic activity. Insights from the comprehensive report influence decisions related to stock markets, currency valuations, Treasuries, and commodity prices like gold.
For instance, significant tremors in the employment landscape, such as the staggering job losses due to the COVID-19 pandemic, are encapsulated in these reports, offering a reflective snapshot of economic recovery dynamics and areas lagging in recovery.
Nonfarm Payrolls and Financial Markets
By evaluating trends like economic expansion, inflation, housing starts, and GDP, data from nonfarm payrolls critically shape the financial markets, influencing investor confidence and market movements.
Frequently Asked Questions
When is Nonfarm Payroll Data Released?
The nonfarm payroll data is typically released on the first Friday of each month at 8:30 AM ET, representing statistics from the previous month.
Are Nonfarm Payrolls Leading or Lagging Indicators?
Nonfarm payrolls are not classified as leading indicators. Instead, they provide a snapshot of events impacting the broader economy.
The Essence of Nonfarm Payrolls
Nonfarm payrolls reflect the holistic employment ecosystem excluding the farm sector, private household employees, proprietors, non-profit employees, and active military members. Reported monthly through the Employment Situation summary, this data reveals significant fluctuations in unemployment rates by demographic criteria and industry-specific job additions within the economy.
Related Terms: Unemployment Rate, Employment Situation, Household Survey, Establishment Survey.
References
- Federal Reserve Bank of St. Louis. “All Employees Total Nonfarm”.
- World Economic Forum. “U.S. Unemployment Pre-Pandemic”.
