Lifehacks from Olymp Trade

Non-Farm Payrolls (changes in the number of individuals employed in non-farm). How this news affects the markets. Life hacks from Olymp Trade

Non-farm is a critical macroeconomic indicator which can have a significant impact on the various markets.  It comes out in the United States in the first Friday of each month and all traders are eagerly waiting for it. In this article Olymp Trade analysts will tell you in details what is Non-farm and what you should primarily pay attention to if you want to predict the asset price trend

?Why is it called Non-farm

Non-farm is an indicator that displays the number of employees in the United States in the non-farm sector for a month. The growth of any economy depends on how many people live in this country, even more specifically how many people are employed and if all these people really work.  If the number of people who work constantly decreases, then, of course, the production of such countries will shrink and the economy will not grow. And, conversely, the increased number of working people leads to the production improvement, to the growth and overall wealth (of course, the economic growth may not always lead to the improvement in overall wealth, but we will not explain such examples now).  The United States economy is the strongest in the world. All economies are interconnected today, so all of them are connected with the United States economy anyway. The slowdown of the U.S. economy could lead to the most serious consequences for other countries. Thus, the formula is very simple – the more the number of people are employed in the United States, the more growth of the American economy is and the better it is for all other countries. In plain language, the Non-farm increase is good, and the Non-farm decrease is bad

You can ask: “Is it growing or declining in comparison with what?” Well, first of all, the numbers are certainly compared with the previous month and, second of all, they are compared with a forecast of various economists. We will examine a bit later how that affects the market

By the way, Olymp Trade traders know that in order to ensure normal growth of the American economy, it is preferable that at least 150,000 jobs appear every month in the country

?How does Non-farm affect the financial markets

To have the high Non-farm numbers is good for the economy, so the dollar should rise thanks to the publication of good statistics. That’s in theory. But in practice, Olymp Trade traders know that it’s not quite true. The fact of the matter is that, as we have said, the economists of different banks form a forecast on the number of employees before the Non-farm release. Let’s imagine the following situation: the number of employed people in the non-agricultural sector is increased by 100,000 the previous month. One month passes and it is again time to take Non-farm. This month, economists predict that another 200,000 people are employed in the sectors of the American economy, not related to agriculture. Thus, the forecast is already coming out before the release of official statistics that the situation is getting better in the American economy. What will all traders do worldwide? You are right, they will buy the U.S. currency. So the price of the U.S. dollar against other currencies will have to take into account 200,000 people by the time of the official data release. Let’s now imagine that economists are not mistaken and the real data is really at the level of 200,000 people. How does that affect the United States dollar? In the best case scenario, it doesn’t because all the traders who wanted to buy dollars have already bought them. In the worst case scenario, traders may even start selling U.S. dollars because they’ve earned the money on the economists’ forecast

If the Non-farm rate might come out better than the forecast, then, of course, the dollar will start growing, because nobody is expecting that optimism, and it happens. And vice versa, if the numbers are worse than the forecast, that would have a negative impact on the dollar, as all traders think that the U.S. economy is growing more rapidly, and it turns out that it is growing lower or not growing at all

Non-Farm Payrolls (changes in the number of individuals employed in non-farm). How this news affects the markets. Life hacks from Olymp Trade

How is Non-farm calculated and what else  is published together with the Non-farm

Most of the numbers are calculated by a banal survey in America. It is the same with Non-farm. 400,000 private and public companies are polled. The United States Bureau of Labor Statistics collects data by mail and by telephone and asks these companies about what happens to the jobs in the companies and they also ask about wages, overtime hours, etc. All these data are processed and published. Non-farm rate comes out from the data of those concerning jobs in the companies. If most companies record an influx of new employees, then Non-farm will certainly grow, but if the number of new jobs per month is low or declines, then Non-farm will decrease

In addition to Non-farm, a few more important indicators are published the first Friday of each month, such as unemployment rate or changes in the average hourly rate. We are not going to explain in details how strongly these indicators can affect the exchange rate. We can only say that, of course, they are able to have a very powerful effect on the world markets, as Non-farm is. Many Olymp Trade traders have already professionally improved their knowledge and successfully apply it in trading

The Olymp Trade analysts also want you to know a lot, and, most importantly, to be able to successfully apply your knowledge in practice

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