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Finance Dictionary and Glossary of Investment Terms
This government survey measures both unemployment levels and nonfarm payrolls and is known to prompt significant market reaction. It is the most timely and broad indicator of economic activity released each month. The employment report is actually two separate reports, which are the results of two separate surveys: a household survey and an establishment survey. The household survey is a survey of roughly 60,000 households. This survey produces the unemployment rate. The establishment survey is a survey of 375,000 businesses. This survey produces the nonfarm payrolls, average workweek, and average hourly earnings figures, to name a few. Both surveys cover the payroll period, which includes the 12th of each month. The reports both measure employment levels, just from different angles. Due to the vastly different size of the survey samples (the establishment survey not only surveys more businesses, but each business employs many individuals), the measures of employment may differ markedly from month to month. The household survey is used only for the unemployment measure - the market focuses primarily on the more comprehensive establishment survey. Total payrolls are broken down into sectors such as manufacturing, mining, construction, services, and government. The markets follow these components closely as indicators of the trends in sectors of the economy; the manufacturing sector is watched the most closely as it often leads the business cycle. The data also include breakdowns of hours worked, overtime, and average hourly earnings. The average workweek (also known as hours worked) is important for two reasons. First, it is a critical determinant of such monthly indicators as industrial production and personal income. Second, it is considered a useful indicator of labor market conditions: a rising workweek early in the business cycle may be the first indication that employers are preparing to boost their payrolls, while late in the cycle a rising workweek may indicate that employers are having difficulty finding qualified applicants for open positions. Average earnings are closely followed as an indicator of potential inflation. Like the price of any good or service, the price of labor reacts to an overly accommodative monetary policy. If the price of labor is rising sharply, it may be an indication that too much money is chasing too few goods, or in this case employees.Importance (A-F): This release merits an A. Source: Bureau of Labor Statistics, U.S. Department of Labor. Release Time: First Friday of the month at 8:30 ET for the prior month Raw Data Available At: http://stats.bls.gov/news.release/empsit.toc.htm.