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News Announcements And Trading

NFP is a monthly statistic collected by the U.S. Bureau of Labor Statistics. The acronym stands for Non-Farm Payroll. The statistic is released by the BLS on the first Friday of each month and is aimed to serve as an index and indicator of the short-term economic status of theUnited States.

The NFP statistic measures the current number of paid employees on payrolls around the country, excluding those in the agricultural, non-profit, governmental, and household sectors. In addition to the number of employees in the complementary sectors, the statistic also provides information on average workweek hours as well as weekly wages and overtime pay.

The interest in the NFP statistic is that NFP employees constitute roughly 80% of U.S. GDP. Because of this fact, the NFP statistic gives a good estimate of how well the majority of wage earners in the U.S. economy are faring on a monthly basis. Because economic prosperity positively influences short-term consumption, the statistic also gives a good idea of how much consumption can be expected in the upcoming month. Thus, NFP serves as an indicator of how the level of transactions is expected to behave in the U.S. economy and thereby helps investors gauge how much currency can be expected to circulate through the economy to help facilitate those transactions.

The amount of money circulating through the economy is important to forex investors because the supply for money directly affects the prices and exchange rates involved in forex trading when coupled with investor demand for national currency.

The above discussion is to say that NFP also measures monthly national economic growth. At the same time, the NFP numbers can also measure whether inflation is on the rise or not in the economy. A rise of inflation would obviously be of interest to traders since it would mean that the national currency has less buying power and would therefore be able to buy one less foreign currency.

We've discussed how to gather economic growth data from NFP, but how exactly does one gather whether or not inflation is on the rise? This is a harder question to answer. Nevertheless, if the NFP figures tend to increase at a large rate over a couple of months, rapid increased expenditures tend to support the view that consumers are more willing to spend larger amounts on goods and services, hinting that price levels, and hence inflation, might rise in response to increased consumer confidence.

There are myriad other ways that investors can interpret NFP numbers. On one hand, investors may try to compare these numbers to predicted values that economists had given in advance. By comparing NFP values to predicted values, investors can gauge how accurately economists are capable of reading business and economic vital signs. NFP values that closely mimic predicted values will lead to investor confidence, while values that are far off from predictions will spur investor doubt.

It should be noted that the NFP values are only one of many possible economic indicators that investors can consult in order to gauge current-day economic growth. Other popular indicators include the consumer price index, GDP, unemployment rates, mortgage volume, and job growth.