Nonfarm payroll is a term used to describe the number of jobs in the private sector and government agencies in the US, excluding farm workers, private household employees, proprietors, non-profit employees, and active military. It is a monthly statistic that represents how many people are employed in manufacturing, construction, and goods companies. The nonfarm payroll report is released by the US Department of Labor and is a key indicator of the labor market. It helps present the overall health of the US economy and its workforce, and investors watch it closely.

The nonfarm payroll report includes several key pieces of information, including the number of total nonfarm payrolls added by an entity for the reporting month, nonfarm payroll additions by industry category, details on hours worked, and details on average hourly earnings. The report also includes the overall unemployment rate of the United States. The financial assets most affected by the nonfarm payroll data include the US dollar, equities, and gold. The markets react very quickly and most of the time in a very volatile fashion around the time the NFP data is released.

The nonfarm payroll report is not a leading indicator but provides a snapshot of incidents that affect the overall economy. A finance professional or market participant can use the nonfarm payroll as a critical economic indicator to gauge whether the US economy is headed towards a recession. It can help dictate the overall strategy an investor takes when determining whether to take long or short positions in companies that influence the nonfarm payroll. In addition, if you anticipate the nonfarm payroll is going to be better or worse than expected, you can take a market position that could ride the volatility when it is released on its monthly Friday schedule.