What the jobs report is and why it moves markets
The monthly US jobs report shows how many jobs were added and the unemployment rate. Here is how to read it and why investors care.
Once a month, usually on a Friday morning, the US government publishes the jobs report. It is one of the most important pieces of economic news. Stocks, bonds and the dollar can all move sharply in the first minutes after it comes out.
What it is
The official name is the Employment Situation report. It is published by the Bureau of Labor Statistics, a US government agency. It is based on two large surveys, one of employers and one of households.
The two main numbers
- Nonfarm payrolls. This is how many jobs were added or lost in the month, from the survey of employers. "Nonfarm" means farm workers are left out, along with a few other groups, because their numbers swing with the seasons.
- The unemployment rate. This is the share of people who want a job and are looking for one but do not have one. It comes from the survey of households.
Other parts worth knowing
- Average hourly earnings show how fast pay is rising. Fast pay growth can feed into inflation.
- Revisions update the figures for the previous two months. They can be large, and they sometimes change the picture more than the new month does.
- The participation rate shows the share of adults who are working or looking for work.
Why markets care
Jobs drive spending. People with jobs and rising pay buy more, which helps company profits.
The report also shapes what the Federal Reserve may do with interest rates. The Fed's job includes keeping employment high and inflation in check.
Why good news can be bad news
This part confuses many people. A very strong jobs report can push stocks down.
The reason is interest rates. A hot job market can mean higher inflation, so investors expect the Fed to keep rates higher for longer. Higher rates can weigh on stock prices. See How interest rates move stock prices.
A very weak report can also push stocks down, because it raises fears of a recession. Markets often like numbers that are neither too hot nor too cold.
Compare with the forecast
Economists publish forecasts before each report. Markets react to the gap between the forecast and the actual number, not to the number on its own.
The Canadian side
Canada has its own monthly jobs data, the Labour Force Survey from Statistics Canada. It is often released on the same day as the US report.
The short version
- The jobs report is published monthly by the Bureau of Labor Statistics.
- The headline numbers are jobs added (nonfarm payrolls) and the unemployment rate.
- Strong numbers can lift stocks, or lower them if investors fear higher rates.
- Markets react to the surprise versus forecasts.
This is general information, not investment advice.
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