What It Measures
Nonfarm payrolls measures the change in the number of employed people during the previous month, excluding the farming industry. The data comes from the Current Employment Statistics (CES) survey, also known as the "establishment survey," which samples approximately 670,000 worksites covering about 30% of all nonfarm payroll employees.
- Unlike the unemployment rate (from the household survey), nonfarm payrolls:
- Counts jobs, not people (someone with two jobs is counted twice)
- Includes only payroll employees (excludes self-employed)
- Covers all ages (no minimum age requirement)
Why It Matters
Nonfarm payrolls is considered the most important monthly economic indicator because:
Direct Measure of Job Creation: Shows actual hiring/firing activity by businesses, reflecting economic momentum.Market Moving: Often causes significant volatility in stocks, bonds, and currencies immediately upon release.Fed Policy Driver: Strong job growth may delay rate cuts, while weak growth may accelerate easing.Revision Watch: Initial estimates are frequently revised in subsequent months, sometimes significantly.How to Interpret
Strong Growth: +200,000 or more jobs per month indicates robust economic expansion.Moderate Growth: +100,000 to +200,000 jobs per month suggests steady but not exceptional growth.Weak/Negative: Below +100,000 or negative readings signal economic slowdown or contraction.Sector Breakdown: Pay attention to which sectors are adding or losing jobs for insights into economic trends.
Key Levels to Watch
| Level | Interpretation |
|---|---|
| +250,000+ | Very strong job growth, economy expanding rapidly |
| +150,000 to +250,000 | Healthy job growth, sustainable expansion |
| +100,000 to +150,000 | Moderate growth, keeping pace with population |
| +50,000 to +100,000 | Below-trend growth, potential slowing |
| Below +50,000 | Weak labor market, recession risk |
| Negative | Job losses, economic contraction |
Historical Context
The U.S. economy typically needs to add about 100,000-150,000 jobs per month to keep pace with population growth. During the COVID-19 pandemic, nonfarm payrolls fell by 20.5 million in April 2020, the largest monthly decline on record.