Unemployment Rate and Nonfarm Payrolls: Why They Are So Important for the Markets

Unemployment Rate and Nonfarm Payrolls: Why They Are So Important for the Markets

2023-09-07 • Updated

On the first Friday of every month, the US Department of Labor releases data on the employment rate and the number of people employed in non-agricultural sectors of the economy. Why is it so important?

First, high unemployment leads to social tensions, promoting the rise to power of radical politicians, and eventually potentially leading to unrest and a violent takeover of power.

Second, it is the effect of unemployment on production and, consequently, on economic growth (GDP growth).

Third, unemployment reduces the flow of taxes into the budget and increases government spending, including such things as unemployment benefits and social security payments.

In the United States, the unemployment rate is calculated with the number of people employed on nonfarm payrolls. This article will discuss how this calculation is done and what you must look for to analyze the unemployment rate.

The US unemployment rate

The unemployment rate is calculated through surveys of about 60,000 families by the Ministry of Labor. Both agricultural and nonagricultural workers are interviewed. A calculation is then made using the following simple formula:

Редизайн картинки для NFP_2560x400 (1).png

Economists agree that a normal unemployment rate is 4-5%. Since the end of the mortgage crisis, the unemployment rate in the US has continued to fall, and reached its historic low in February 2023 (3.4%).

1 (1).png

We should remember that the US Department of Labor only counts people actively looking for work as unemployed. People who cannot change their situation are not counted in the unemployment rate.

Nonfarm Payrolls

Nonfarm Payrolls (NFP) are also calculated through surveys. This time, however, 440,000 companies with more than 50 million workers are being surveyed. Thus, this metric measures by how much the number of people employed in companies increased or decreased.

What number of NFPs is considered "normal"? The general idea is the more, the better. More labor means stronger economic growth, which often leads to higher inflation. According to various estimates by economists, with normal development of the American economy (3-4% per year), the number of jobs created should be at least 150,000 per month.

If you pay attention to the NFP figure, you can see how badly the crisis years have affected employment results (the figure was negative).


What else is published along with the unemployment rate and NFP?

The US economy is very complex and rich in different statistics. Along with the unemployment rate and nonfarm payrolls, several other indicators should be paid attention to.

Leaving aside the calculation of different NFP indicators for other groups (e.g., NFP for government workers and NFP for the private sector), the most relevant indicators are average hourly earnings, average workweek, and the percentage of the economically active population.

The growth of average hourly earnings leads to an increase in consumer spending, which increases consumption and consequently, economic growth. Therefore, this indicator can significantly impact the market situation.

As the name implies, the Average Workweek measures how many hours workers work during a week on average. An increase in the average workweek is considered an indicator of economic growth, while a decline is likely to lead to corporate layoffs.

The share of the economically active population reflects the number of people who have or wish to have a source of livelihood. These are people between the ages of about 15 and 70, who may be both employed and unemployed.

Consequently, the growth of the economically active population is, of course, good for the economy.

What should I look for to determine the reliability of the NFP and unemployment forecast?

Even before the Unemployment Rate and Nonfarm Payrolls are released, a block of unemployment statistics is released in the US, affecting the consensus forecast. This article will explain what we need to pay attention to in order to understand if the consensus forecast is reasonable.

Number of initial jobless claims and number of secondary jobless claims (released every Thursday; data collected weekly)

Estimate: the higher the number of applications for unemployment benefits, the worse the employment situation is. Consequently, if the number of monthly applications increases, we should hardly expect a positive unemployment rate.

Challenger, Gray&Christmas Job cuts

Estimate: the more people are cut, the higher the unemployment rate. The connection is quite apparent. Unfortunately, however, it is tough to assess what number of people to be cut is normal and what number is above the norm. We suggest keeping an eye on the surge indicator. If there is a significant number of redundancies, we can say that the unemployment rate is unlikely to go down.

Conference Board Job Index

Estimate: the higher the index of job announcements, the lower the unemployment rate. It seems logical to track the indicator in dynamics. The fact is that the growth of the vacancy rate is not immediately reflected in the unemployment rate. The interview and hiring procedures take some time (one or two months).

ADP Nonfarm payrolls

Estimate: this is one of the most controversial indicators, which raises many questions. Before the nonfarm payroll figure is released, a preliminary assessment from Automatic Data Processing Inc. (ADP) is released the day before publication (Wednesday). The report is generated by evaluating about 340,000 companies and 21 million workers. Unfortunately, the data from the ADP report and the US Department of Labor often do not match up.


Knowing how to forecast Nonfarm Payrolls numbers will give you a powerful tool in your market analysis.

Try to trade on Nonfarm payrolls release with FBS.

Try your trading skills


How to find and trade a growth stock
How to find and trade a growth stock

FBS offers you selected stocks most of which are decades-proven titans. How to choose the best ones among them and what to do next? This article explains!

Frequently asked questions

  • How to start trading?

    If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.

  • How to open an FBS account?

    Click the 'Open account' button on our website and proceed to the Trader Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading.

  • How to withdraw the money you earned with FBS?

    The procedure is very straightforward. Go to the Withdrawal page on the website or the Finances section of the FBS Trader Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.

Deposit with your local payment systems

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.


A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera