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Definition : The jobs report in all economies is generally considered the summary for the labor market during the given period; it is a vital indicator that provides the insight into the health of the economy, as it is considered as the solid base block.
The major components of the report in various economies differ, yet the key issue remains the unemployment rate and the change in jobs during the time. In the UK the report is released by the Office for National Statistics (ONS) as Claimant Count Change and rate, in addition to the Unemployment rate; while in the Euro Zone mainly the Unemployment rate is what's highlighted reported by the Eurostat. Nevertheless the god father of all employments reports is the US the labor report released by the Bureau of Labor Statistics (BLS) known by the key element in the report, the change in nonfarm payrolls.
US Labor Report
In the labor report by the Bureau of Labor Statistics (BLS) is usually reported on the first Friday of the new month for the period covering the prior month. It consists of two separate vital surveys, the first is the establishment survey it is the most comprehensive report on labor, sampling over 400,000 businesses across the US. It covers near one-third of all nonfarm workers, presents the final statistics including the change in nonfarm payrolls, the average hourly earnings, and hours worked.
The second survey is household survey covers more that 60 thousand households reporting the final figure totaling the number of unemployed individuals, and the results in the national Unemployment Rate.
The reading is reported as the change in non-farm payrolls form the previous month, meaning the total number of added or reduced jobs in the economy; it covers almost 80% of workers who produce the total GDP in the United States, the data covers workers in all businesses excluding the following:
â€¢ General government employees
â€¢ Private household employees
â€¢ Employees of nonprofit organizations that provide assistance to individuals
â€¢ Farm employees
Average Hourly Earnings:
Is the rate of pay growth change from one month to the other, reported as percentage growth on the year as well; the readings provides indication about pay growth and how comprehensible is it to support spending and according to inflation as well. The reading is also combined by the Employment Cost Index (ECI) to create a more comprehensible look into the ability and affordability of workers to spend in the economy.
The percentage of total civilian workforce unemployed that are capable and actively seeking employment; it is the number of unemployment rate divided by the total civilian force. Used as a gauge to indicate the health of the economy yet it is considered as a lagging indicator and for that combined with the rest of the components of the Labor Report give a much more comprehensible indication for the economy.
Why is it useful?The cyclic motion of the production wheel is the result of increased demand in the market, therefore if the Nonfarm payrolls are the numbers of jobs added in the economy for a certain time then that number reflects the necessities of the market as the level of demand that requires a specified number of jobs to be added in the economy.
In this cycle we can say that the increase in the number of Nonfarm payroll has a positive effect on the currency, for the added jobs means stronger production levels hinting hire demand levels and that same added number also help to add spending in the economy so a healthier stronger economy means also a stronger currency.
As for the equity market jobs added means more production meaning that the industries are functioning right therefore higher earnings consequently higher stock value which is as well considered a positive effect, and the opposite is as well applicable in both cases.
The unemployment rate is a very important measure to the capacity of employment the economy can handle. Now as simple this number seams but its yet widely governing more than the number reflected in the Nonfarm payrolls and reflects a more focused picture. Now in any normal measure this is simple the decrease in the percentage in unemployment is better for the economy noting that the normal range of unemployment is 5% therefore expecting very low readings is highly unlikely and if so it is merely a reflection of high levels of inflation that the economy is trying hard to produce more that it can handle.
The effect is simple taking into consideration the above mentioned information, a decline in the unemployment rate has a positive effect on the currency and the equity market that as mentioned above implies production prosperity and a revitalized economy, and the opposite is applicable in both cases as well.
The reason why it is the nonfarm payrolls numbers that grab all the attention, is the level of volatility this numbers has, while the unemployment rate is more steady and easy to measure.
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