Nonfarm payroll (NFP) report is a statistically researched and compiled report that is formulated by United State’s department of labor. This elaborative report represents details about all of the paid workers belonging to any business in US except employees belonging to following entities; Government employees, nonprofit organization’s employees, farm employees and private household employees. Nonfarm payroll report is considered to be an important indicator as for as US labor market is concerned. This report that is published monthly includes estimates about average work week and average weekly earnings of the employees of US excluding those employees that belong to above stated categories. This report also covers statistics about the number of jobs lost or gained in America during a specific month. NFP is said to affect the currency value of US Dollar, bond market, stock market and specifically foreign exchange market of US.
In forex market, the nonfarm payroll (NFP) report is supposed to cause systematically largest rate movement of any sort of news declaration. Monthly nonfarm payrolls are anticipated and speculated in a way that it may cause large price swing. If there is an anticipation or speculation that employment will increase, it will build a perception that businesses will grow and the people would spend more money on goods and services, whereas vice versa is the case of anticipated or speculated decrease in employment.
NFP generally releases on the very first Friday of each month at approximately 8:30 am EST. The release creates a certain environment for traders as it clarifies the trading situation. Though it cannot be claimed that every trader would be able to make money out of NFP release but more consistent results can be achieved by logically and critically approaching the NFP release.
Following are the five common notes that need to be watch out regarding nonfarm payrolls releases, especially during a period of financial crisis.
• New traders should strive to stay away from NFP releases; Newbie traders are not recommended to react over speculations and anticipations about NFP release. The volatility of NFP release can harm new traders.
• Analyzing certain actions before actual release; Before the release of US NFP, approximately an hour and a half before Canadian employment figures is released. Many traders relate Canadian report with the US NFP release. Beside that just before the release of the NFP report certain economic movements can be recorded that ultimately define the direction of expectations.
• As a result of the US NFP release either Dollar appreciates or depreciates can be determined after hours of time after the release therefore once the change in Dollar is determined it can be perceived that this rate will be the close of the week.
• Speculation may cause unrealistic upward trend or downward slope. This temporary change in the graph is normalized just after the release of NFP hence unrealistic trend comes to some realistic position.
• Immediate reaction is not recommendable; Immediate reaction to NFP release can be harmful for the traders. Experience traders recommend knee jerk reaction towards US NFP release.