#Gate广场五月交易分享 Non-farm Payrolls Report, How Does It Shake Up the Global Markets?

Why is this Non-farm Payrolls report so important? Which indicators should we focus on? Today, let’s quickly understand the U.S. Non-farm Payrolls report and see how it stirs the global markets.

01 The Influence of the Non-farm Payrolls Report
The full name of the Non-farm Payrolls report is the U.S. Non-agricultural Employment Report. It records employment data for all businesses and government agencies in the U.S., excluding farmers, domestic workers, and some nonprofit organization employees. On the first Friday of each month, the BLS releases the statistics for the previous month. The reason this report attracts worldwide market attention is that:
Non-farm data directly reflects the health of the U.S. economy; economic health influences the Federal Reserve’s monetary policy, which in turn affects the dollar’s trend and the global market direction.
The process by which employment data impacts the global market generally involves the following four steps:
1. Non-farm data is one of the most direct and authoritative indicators of the U.S. economy’s health. An increase in employment is a positive signal, indicating strong economic momentum. Conversely... look at China’s employment and economic development over the past two years to understand... In the past three months, U.S. non-farm job additions have significantly fallen short of expectations, undoubtedly sparking concerns about recession, and the stock market naturally plunged after the data was released.

2. Non-farm data influences the Federal Reserve’s monetary policy. The Fed has two main missions: one is to stimulate employment, and the other is to control inflation. If the labor market is strong, the Fed tends to raise interest rates to curb inflation. If it’s weak, it’s more likely to cut rates or adopt other easing policies to stimulate the economy. Currently, the market expects a 90% chance of the Fed cutting interest rates by 25 basis points in September.
(Source: CME FedWatch, August 5)
3. The Federal Reserve’s monetary policy directly impacts the dollar’s trend. If the Fed raises rates or maintains high interest rates, it will boost the dollar’s strength. Once rate cuts begin, the dollar will continue to weaken, and some capital will flow back into other assets more quickly.

4. The U.S. economic condition has spillover effects on the global scale. For example, changes in U.S. demand directly impact global trade, and fluctuations in financial markets can trigger global linkages and capital flows.
As the primary reserve currency, the strength or weakness of the dollar affects global exchange rates, trade costs, and the monetary policies of other countries’ central banks. U.S. policies and economic confidence also transmit worldwide. The recent market reaction to the below-expected non-farm job additions is a vivid example of this.

02 Key Indicators of the Non-farm Payrolls Report
Although the non-farm report contains a lot of information, understanding a few key indicators can help grasp the Federal Reserve’s policy tendencies.
1. Non-farm employment: This data is based on surveys of businesses and is the most closely watched figure in the report, showing how many new jobs were added or lost in the U.S. non-agricultural sector last month.
2. Unemployment rate: This data is based on household surveys, measuring the percentage of the labor force that is unemployed but actively seeking work.
3. Labor force participation rate: The proportion of the population aged 16 and above that is either working or actively seeking work. It reflects the activity level of the labor market and the potential labor supply. PS. The unemployment rate and participation rate should be considered together; if the participation rate declines, even a falling unemployment rate might indicate that the labor market isn’t truly strong.
4. Average hourly earnings: Reflects the growth of average wages for American workers. Rapid wage growth can signal inflationary pressures, as higher labor costs may be passed on to consumers.
5. Initial estimate: The first non-farm employment data released by the BLS. Since data collection and analysis take time, this initial figure is based on preliminary, incomplete survey samples.
6. Previous value: The employment data from the last non-farm report, after final revisions. When you see this month’s report, it will mention the previous value for comparison.
7. Current value: The employment change announced when the non-farm report is officially released, and the most market-focused figure.
8. Expected value: The forecast made by market analysts, economists, and financial institutions before the report’s release. Market reactions largely depend on the difference between the actual data and this forecast.