On a typical first Friday of the month, traders watch the clock tick to 8:30 a.m. Eastern Time. That is when the US Bureau of Labor Statistics (BLS) releases the Employment Situation report, better known as the jobs report. It can move stocks, bonds, and the dollar within seconds.
Two surveys in one report
The establishment survey
The headline number, nonfarm payrolls, comes from a survey of businesses and government agencies. It shows how many jobs were added or lost in the prior month, by industry. The same survey provides average hourly earnings and average weekly hours.
The household survey
The unemployment rate comes from a separate survey of households. It also provides the labor force participation rate and other measures of who is working and looking for work. Because the two surveys use different methods, they sometimes tell different stories in a given month.
The numbers markets watch
- Nonfarm payrolls vs. consensus: the size of the surprise matters more than the number itself.
- Unemployment rate: a key input to the Fed’s employment goal.
- Average hourly earnings: wage growth, closely watched as a source of inflation pressure.
- Revisions: the BLS revises the previous two months’ payroll figures each month, and makes a larger annual benchmark revision. Large revisions can change the picture substantially.
- Participation: shows whether people are entering or leaving the labor force.
Why good news can be bad news
A strong jobs report is good for the economy, so you might expect stocks to rise. Often they do. But investors read the report through the lens of the Federal Reserve. If hiring and wage growth are very strong, the Fed may see less need to cut rates, or more need to raise them, to keep inflation in check. That can push Treasury yields higher and weigh on stock valuations, especially for growth stocks.
Conversely, a weak report can lift stocks if it raises hopes for rate cuts, unless it is weak enough to spark recession fears. How the market reacts depends on whether investors are more worried about inflation or about growth at that moment.
Other labor data worth knowing
- Weekly jobless claims: released every Thursday, a timely read on layoffs.
- JOLTS: the BLS Job Openings and Labor Turnover Survey, covering openings, hires, and quits, with a longer lag.
- ADP National Employment Report: a private-sector estimate released shortly before the official report, though the two often differ.
Putting it in context
No single month tells the whole story. Look at the trend over several months, the revisions, and how wage growth compares with inflation. The jobs report is one of several data points the Fed weighs; see how the Fed sets interest rates and CPI vs. PCE.
