What is Non-Farm Employment?

Definition

Non-Farm Payrolls refer to the total number of paid workers in a country (usually the United States) excluding those in the agricultural sector. This indicator does not include employment in agriculture, household employees, and non-profit organization workers. Non-Farm Payrolls are a crucial economic indicator used to assess the employment situation in sectors other than agriculture, including manufacturing, construction, government, and other services.

Origin

The statistics for Non-Farm Payrolls are compiled by the U.S. Bureau of Labor Statistics (BLS), with the monthly Non-Farm Payroll report being considered one of the most important data points for evaluating the U.S. economic condition. The history of this indicator dates back to the early 20th century, as industrialization progressed and employment in non-agricultural sectors became a key component of economic analysis.

Categories and Features

Non-Farm Payrolls primarily cover industries such as manufacturing, construction, government, and other services. Its main feature is its ability to reflect the health of the economy: an increase in employment numbers is typically seen as a sign of economic growth, as more job opportunities imply higher consumption capacity and production activity. Conversely, a decrease in Non-Farm Payrolls may indicate economic slowdown or recession.

Case Studies

A typical case is during the 2008 financial crisis when the U.S. saw a significant drop in Non-Farm Payrolls, reflecting severe economic recession. Conversely, in the mid-2010s, as the economy recovered, Non-Farm Payrolls steadily increased, indicating economic recovery and growth.

Another example is the early stages of the COVID-19 pandemic in 2020, where Non-Farm Payrolls plummeted sharply, followed by a gradual rebound as the economy began to reopen and recover.

Common Issues

Investors often face challenges with the volatility of Non-Farm Payroll data, which can be due to seasonal factors or temporary economic events. Additionally, revisions to Non-Farm Payroll data can affect market expectations, so it is important to analyze it in conjunction with other economic indicators.