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Learn to Trade the Non-Farm Payrolls

non farm payroll

To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. By controlling risk with a moderate stop, you are poised to make a potentially large profit from a huge move that almost always occurs each time the NFP report is released. Another approach is to place a trade a few minutes before the figure is released.

non farm payroll

The CB consumer confidence index fell slightly in May, to 102.3 from 103.7 a month earlier, with a significant deterioration of current employment conditions. The US Bureau of Labor Statistics (BLS) reported on Friday that Nonfarm Payrolls rose 339,000 in May. This reading surpassed the market expectation of 190,000 by a wide margin. Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning. The BLS is committed to providing data promptly and according to established schedules.

What Are Non-Farm Payrolls (NFP)?

In the example above, we can see how EURUSD reacted to the NFPs in June 2016. The market anticipated a number of 159,000 new jobs created in the non-farming sector in the US economy, while the actual reading brought a negative surprise of a mere 38,000. The worse than expected reading caused the weakening of the US dollar against the euro with the EURUSD market gaining 154 pips in value in a matter of just 30 minutes. Better than expected growth in NFPs indicates that the US labour market is strengthening, improving the prospects for the US economy. This then often has a positive effect on the US dollar and US stocks.

non farm payroll

While this strategy can be very profitable, it has some pitfalls to be aware of. The market may move aggressively in one direction and thus may be beginning to fade by the time an investor gets an inside bar signal. In other words, if a strong move occurs before the inside bar, it is possible that a move could extinguish before a signal. During high volatility times, rates can reverse quickly even after waiting for a pattern to set up.

How to trade non-farm payrolls

The elaboration of some macroeconomical analysis is essential for successful trading. The Employment Situation report provides a snapshot of the effects of significant events that impact the economy. The COVID-19 pandemic stifled economic activity and erased nearly 20 million jobs within weeks in March 2020.

  • This material is from CME Group and is being posted with permission from CME Group.
  • Conversely, a high number of additional jobs (generally, anything in six figures, but particularly 200,000 or more) is likely to be a positive factor in terms of pushing USD gains.
  • To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice.
  • An Easter Bunny came out of the hat – the NFP is almost magical for stocks, providing all the ingredients for bulls to run once markets open.
  • There are several techniques used when it comes to trading the non-farm payrolls, with popular strategies including fading the initial move and trading the trend.
  • Specialties include general financial planning, career development, lending, retirement, tax preparation, and credit.
  • That has been the response to the first Nonfarm Payrolls report for 2023, which showed a whopping gain of 517,000 jobs in January, far above the 223,000 projected by economists.

You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. With so many investors watching this data release, the payrolls can result in some sharp moves in the financial markets​, both up and down, depending on how close the actual figure is to estimates made ahead of the announcement. This makes the payrolls a popular trading opportunity for many forex and indices traders. This is because the higher the number of people in employment in a country, the better its economic output can be expected to be at the end of the quarter and vice versa. Large differences between the actual numbers and the expected numbers tend to create long-lasting market reactions that can last for hours or days.


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