NFP: meaning and everything you wanted to know about it

Nonfarm Payrolls are one of the major reports that influence trading worldwide. Here's a short reference card to help you understand it.

Nonfarm Payrolls (NFP) are an important indicator of the U.S. labour market. Traders follow NFP closely because it significantly influences major assets.

The Nonfarm Payrolls report shows the level of unemployment. The higher the number, the more people are employed.

What is NFP?

Nonfarm payroll (NFP) is a red folder news in Forex that comprises monthly reports on employment figures in the manufacturing, construction, and goods sectors. These sectors account for approximately 80% of jobs created in the U.S. economy. However, the NFP excludes farm work, private household workers, non-profit employees, and the self-employed. NFP affects the Forex market and other markets such as crypto, metals, and Indices.

High volatility during NFP news on BTCUSD

Think of it as a way to check how the job market is doing. Every month, the Bureau of Labor Statistics (BLS) gathers information from different businesses to see how many jobs are being created or lost in various industries. By comparing this month's numbers to the previous month or the same month last year, we can see whether job opportunities are increasing or decreasing. It's a valuable tool for figuring out the health of the US economy.

Here are the key parts of the NFP report:

• The unemployment rate is the percentage of people in the labour force who don't have jobs but are actively looking for one.
• Average hourly earnings indicate how much workers are earning on average. If job numbers are up but wages are falling, it could signal that the economy isn’t as strong as it appears.
• Job sector changes show which industries are gaining or losing jobs. For example, if more jobs are being created in technology but fewer in manufacturing, that tells us where the economy is growing and where it might be shrinking.
• Revisions to past data are the updates to previous reports. Each NFP report includes updates to job figures from the past two months. These revisions can be significant—sometimes showing that the job market was stronger or weaker than initially reported.

The NFP data is crucial because it allows experts to assess the economy's overall health. For example, the Federal Reserve uses it to gauge job growth or losses when deciding whether to raise or lower interest rates.

If there are many new jobs, it may signal that the economy is growing too quickly, potentially fueling inflation. In that case, the Federal Reserve might increase interest rates to cool things down. On the other hand, falling job numbers can suggest the economy is struggling, leading the authorities to consider cutting rates to stimulate growth.

It's worth paying close attention to the NFP report as it can influence the value of the U.S. dollar.

Why should I pay attention to a report from the U.S.?

Since USD is one of the most important currencies in the world, it can and will influence many currency pairs and other trading instruments. Every potential change counts when we talk about the economy as a whole.

How do they calculate NFP?

This indicator is based on data from a monthly survey of businesses and government agencies, excluding farm workers, private household employees, non-profit organisation staff, and the self-employed. Importantly, NFP measures filled positions, not job openings—so it only includes jobs taken, not just advertised.

How do you use NFP in trading?

Tracking changes in NFP over time helps traders gauge economic strength or weakness. For example, consistent job growth suggests a healthy economy, which may strengthen the US dollar. On the other hand, disappointing numbers could trigger a sell-off. Seasonal patterns—like increased hiring in tourism during summer—can also offer context for interpreting short-term movements.

When do we get the NFP report?

The US government releases nonfarm payrolls every first Friday of the month. It's the last day of the trading week, and everyone has at least two days to prepare.

How to read and understand the NFP?

There is an easy algorithm that can help you determine how NPF will influence the economy.

• Low unemployment rates → higher interest rates → national currency rises in price
• High unemployment rates → low interest rates → national currency becomes cheaper

Since this report concerns the U.S. economy, we can draw a simple conclusion: low unemployment rates lead to the USD rising in price, and high unemployment rates lead to the USD falling in price.

Which assets should I trade?

Most traders prefer the following:

• EURUSD
• GBPUSD
• USDJPY
• USDCHF
• USDCAD
• AUDUSD

Is it always 100% correct, and should I follow it?

News trading demands careful consideration of many other factors. It always includes risks since the market can become volatile.

Anything else I need to know?

It's important not to dive right into trading immediately after or before the government releases this report unless you're very well prepared. The market during news releases is volatile and less predictable, which may result in unfavourable results. While news trading can be attractive for some, many traders prefer to open new positions on Monday after the release of NFP.

Now, you can add one more point to your fundamental analysis and step up your trading. Make sure you check the previous reports and consider other indicators and risk management when developing your trading strategy.

Final thoughts

• The Nonfarm Payrolls (NFP) is like a giant scoreboard for jobs in the U.S. It shows how many jobs have been created or lost in the country.
• NFP excludes farm work, private household workers, non-profit employees, and the self-employed. It explains how much people earn in different industries and the unemployment rates.
• NFP helps the Federal Reserve decide how to manage the U.S. economy. If many people get jobs, it might mean the economy is doing well, so the Fed might raise interest rates. If fewer people get jobs, they might lower rates to encourage spending.
• When the NFP report comes out, it can change how much the U.S. dollar is worth compared to other currencies.
• If the NFP shows good trends like low unemployment rates, the dollar might get stronger. If the report indicates destructive dynamics, it could weaken.
• The Nonfarm Payrolls report is essential for both authorities and financial analysts worldwide.