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Understand the Nonfarm Payroll

Payroll is essential to assess the US economy, as it indicates the US employment rate. However, a thorough assessment needs to be made, considering a range of other micro and macroeconomic factors.

In this article, understand how it works, how important it is, and how it takes into account the personal finance of every American. If you want to learn more and solve all your doubts, just follow the reading until the end!

What is Payroll Report?

The Payroll Report is the leading employment index for the US economy. Also called the Non-Farm Payroll, it shows the variation in the number of people employed in the United States from month to month — excluding only workers employed in the agricultural sector.

The data is released monthly, always on the first Friday of each month, within the employment report produced by the Bureau of Labor Statistics — the official body of the US government to monitor the labor market.

In fact, it is part of every good investor’s routine to follow the macroeconomic indices of the main countries in the world, in order to understand their investments. Thus, one of the most impacting on the financial market, in general, is the American Non-Farm Payroll indicator (popularly known only by the name of Payroll).

Therefore, as it is released every month, Payroll presents important information about the performance of the American economy. Thus, the indicator ends up influencing the behavior of the entire market significantly.

How does the Payroll Report work?

In general, the increase in employment shows that companies are hiring, which means that the economy is growing and that the population has more money to spend on goods and services.

However, in addition to informing the market how many jobs were created compared to the previous month, the employment index of the US economy also presents other important information about the US labor market.

First, these data allow us to know the unemployment rate in the North American labor market. In addition, it is possible to know which sectors and economic activities are hiring the most and which are laying off the most, in order to know which sectors are promising.

On the other hand, it is possible to understand more about the particularities of the employability index. Metrics such as social class, age group, and country region can be used.

Finally, it is possible to find out more about the variation in the average hourly wage. It is worth noting that, in the United States, most salaries are based on hourly rather than monthly payments.

What is the Payroll Report for?

As the number of jobs reported in this index represents about 80% of the American GDP, the Non-Farm Payroll is one of the main “thermometers” of the country’s economy.

In other words: this document ends up serving as a basis for analyzing the current economic situation or for making future projections. Therefore, due to this importance, the data disclosed in the report end up influencing the behavior of the entire financial market.

In other words: the Payroll result directly impacts both the interest rate variation, the dollar price (currency used in the USA), and the purchase and sale of shares, bonds, and assets traded on the US stock exchanges.

Thus, investors are able to know, for example, which sectors are experiencing greater growth, which companies have a good economic outlook.

In addition, it is possible to know what will be the trend of movement of the dollar, American government bonds, and other assets linked to the United States. Since the United States has the world’s largest financial market, the effects of the data announced by Non-Farm Payroll also extend to the markets of other countries.

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