Employment figures represent trends in the labour market - one of the pillars reinforcing the structure of every economy in the world.
Job figures reveal insights into salary growth, investment in new jobs and even the direction that consumer spending might take.
Like a fast-growing vine, the effects of job reports spread across many different sectors of the economy. Jobs mean salaries and salaries mean bank deposits, savings, loan payments, stock investments and real estate investments in addition to payments for goods and services. When the economic climate nurtures the labour market, the vine is fruitful and the whole economy grows.
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US employment figures
The most-watched benchmarks of the US jobs market are the Non Farm Payrolls (NFP) and the Automatic Data Processing (ADP) National Employment Report.
Non farm payrolls definition
Non farm payrolls reports are a survey of 670,000 individual worksites. They cover employment trends in every category of jobs except for agricultural workers.
ADP vs non farm payrolls
The main difference between the two is that the NFP report covers public and private sector jobs and is published by the US Bureau of Labour Statistics state agency. The ADP report covers private sector jobs.
Both labour reports are important for tracking job trends and they influence sentiment and confidence towards investment and trading decisions.
What are employment figures?
The NFP and ADP job reports are released within days of each other at the end of the first week of each month. NFP Friday is the first Friday of the month and is a famous financial event in the trading markets.
The surveys are also reported quarterly and on an annual basis and cover:
- Employment hours
- Salaries – growth or decline
- The number of jobs for the period
- The number of unemployment claims for the period
- The growth or decline in jobs compared to the previous period
What do today’s job numbers report mean to traders?
Traders in the Forex market pay close attention to job data and use it to trade USD currency pairs because the reports can change the value of the USD exchange rate. NFP and ADP releases are major financial events.
The markets don’t like to be surprised so economists and financial analysts devote most of their time to building consensus figures ahead of the reports. These projections create expectations for investors and traders.
If the job numbers are significantly lower than expected, the USD and its derivatives like CFDs on the USD currency crosses may be sold off because a decline in jobs usually tracks an economic downturn. At the same time, spot gold prices may rise since the precious metal is a rival safe-haven asset.
If the employment report is better than expected, the USD may become the favourite safe-haven asset and rise against other currencies. In another scenario, if there is not much change in the labour market, there may be little or no reaction from investors.
Employment figures UK
Employment figures in the UK are researched by the Office for National Statistics (ONS) and released on a monthly, quarterly and annual basis. The surveys give insights into average weekly earnings in the UK and cover vacancies and jobs data in the public and private sectors.
Employment figures in the news
Employment figures frequently make the headlines and these news releases are market-moving events. These statistics represent the heart and soul of an economy – individuals earning a living to pay for education, utilities, travel, transportation, fuel, food, taxes, entertainment and many other of life’s expenses.
Links between employment figures and assets
Employment figures are linked to a number of financial instruments and underlying assets. Here are just a few of them:
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The local currency and forex crosses
The labour market is so important to the economy that any weaknesses can undermine the local currency and signs of strength can support the currency’s value against other currencies.
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Real estate instruments
When jobs data is strong, people have more money to invest in real estate. This can have a positive impact on real estate stocks and property prices. The reverse is true when the unemployment rate rises.
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Mortgages, insurance and bank stocks
The retail financial sector depends heavily on a strong labour market because individuals use their salaries to repay mortgages, subscribe to insurance schemes and to invest in stocks.
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Retail and vehicle stocks
When salaries are on the rise and jobs are plentiful, the retail sector is supported by consumer spending. Vehicle sales increase and car owners may trade in old models for new ones more frequently, meaning higher turnover and revenues in the sector.
To sum up, employment figures are integral to fundamental analysis and can support trading and investment decisions with meaningful data.
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