NFP Explained: Nonfarm Payrolls, Market Impact, Trading Tips

1. What is NFP?

Definition of NFP

NFP (Non‑Farm Payrolls, the number of non‑agricultural sector employees) is one of the key economic indicators that reflects the health of the U.S. labor market. It is released by the U.S. Department of Labor (Bureau of Labor Statistics, BLS) on the first Friday of each month, showing the change in employment across all industries except agriculture.

The release of NFP has a significant impact, especially on the foreign exchange (FX) market, the stock market, and the gold market, making it a highly watched event for traders and investors.

Purpose of NFP

NFP is used to understand the U.S. employment situation and analyze economic trends. Changes in employment affect personal consumption and overall economic growth, making it an important indicator for measuring the health of the U.S. economy.

Reasons Why NFP Is Considered Important

NFP is considered important for the following reasons.

• Indicator of economic health
• Changes in employment indicate consumer purchasing power and the direction of economic growth.
• Influences the Federal Reserve’s policy decisions
• If employment deteriorates, the likelihood of monetary easing increases, whereas a strong job market raises the possibility of rate hikes.
• Significant impact on markets
• Immediately after the NFP release, the U.S. dollar can experience sharp fluctuations in the forex market, presenting both trading opportunities and risks for investors.

Relationship Between NFP and the FX Market

NFP results are one of the most closely watched indicators in the FX market. For example, if the NFP figure is better than expected, the U.S. dollar tends to be bought; if it falls short of expectations, the dollar tends to be sold. It is especially prone to affecting major currency pairs such as USD/JPY and EUR/USD, and many traders trade around the release.

Timing of the NFP Release

NFP is released every month on the first Friday at 9:30 p.m. Japan time (8:30 p.m. during daylight saving time). Because the market can move sharply immediately after the release, it is essential to carefully consider your trading strategy.

2. Details of NFP

Definition of NFP

NFP (Non-Farm Payrolls) is a statistic that shows the change in the number of employees in private companies and the government sector, excluding the agricultural sector.

NFP Release Schedule

NFP is released on the first Friday of every month. The release times are as follows:

NFP and Related Indicators

Unemployment Rate

• An important indicator released simultaneously with NFP.
• When the unemployment rate falls, the labor market is considered strong.

Average Hourly Earnings

• An indicator that shows the rate of wage increase.
• An increase in wages raises inflationary pressure and influences the Fed’s rate hike decisions.

ADP Employment Report

• A private-sector employment statistic released two days before the NFP.
• It can be used as a reference for forecasts, but it does not match the NFP exactly.

Impact of NFP on the Market

Impact on the Foreign Exchange Market (FX)

• Strong NFP versus expectations (job growth) → US dollar rises
• Weak NFP versus expectations (job loss) → US dollar falls

Impact on the Stock Market

• When NFP exceeds market expectations, corporate earnings are expected to improve, and stock prices tend to rise.

Impact on the Gold Market

• If NFP is strong, gold tends to be sold; conversely, if NFP is weak, gold is bought.

3. Trade Strategy During NFP Announcement

Market Trends Before the NFP Announcement

Before the NFP announcement, markets often adopt a cautious stance, and the following characteristics can be observed.

• The market becomes quiet
• In the 1–2 hours before the announcement, large trades decrease and price movements slow down.
• Pre-announcement expectations influence the market
• A few days before the NFP, the ADP Employment Report and Unemployment Insurance Claims are released, and the market may already be moving to some extent.
• Risk management is crucial
• Because volatility (the intensity of price changes) increases, setting stop losses is necessary.

Price Movement Patterns Immediately After the NFP Announcement

1. First Wave (Sudden Movement Immediately After the Announcement)

• At the moment of the announcement, prices often swing dramatically.
• The spread (difference between sell and buy prices) temporarily widens, increasing transaction costs.

2. Second Wave (Determining Direction)

• After 5–10 minutes after the announcement, the market begins to move in one direction.

3. Third Wave (Adjustment Movement)

• 30 minutes to an hour later, short-term traders take profits, and prices may move in the opposite direction.

Trade Strategies During the NFP Announcement

1. Avoid Positions Before the Announcement (For the Cautious)

• A strategy that enters after assessing market movement post-announcement.

2. Initial Breakout Strategy

• Enter when the recent high or low is broken.

3. Retracement Strategy (Targeting Pullbacks and Retracements)

• After the initial movement calms, target pullback buys and retracement sells in line with the trend.

Points to Note for Beginners

1. Consider the widening of the spread
2. Always set stop losses
3. Scalping before and after the announcement is risky
4. Be cautious when using leverage

4. Past NFP Data and Market Reactions

Past NFP Data

By analyzing past NFP results, it becomes easier to grasp market reaction patterns.

Market Reaction Patterns

1. Better than expected (Employment increase)

• Market reaction: The US dollar is bought (USD/JPY rises).

2. As expected

• Market reaction: Almost no movement, or only temporary fluctuations.

3. Worse than expected (Employment decline)

• Market reaction: The US dollar is sold (USD/JPY falls).

Typical Price Movements After NFP Release

1. Trend emerges after a sharp rise or fall
2. Direction is determined after initial reversal
3. Ends with only temporary volatility

5. FAQ Section

Q1: What is NFP?

A:
NFP (Nonfarm Payroll) is an indicator that reflects the change in employment across all sectors in the United States, excluding agriculture.

Q2: How does NFP affect the market?

A:

• If NFP is better than expected (employment increases) → the US dollar rises
• If NFP is worse than expected (employment decreases) → the US dollar falls

Q3: What is the difference between NFP and employment statistics?

A:
NFP is part of employment statistics and is one of the most important indicators among employment-related data.

Q4: Where can I check the NFP release?

A:

• U.S. Department of Labor (BLS) official website
• Financial sites such as Investing.com, ForexFactory, Bloomberg, etc.

Q5: What is the difference between NFP and ADP employment statistics?

A:

Q6: What time is the NFP release in Japan time?

A:

6. Summary

Key Points of NFP

• NFP is an important economic indicator that reflects the U.S. employment situation and has a significant impact on the market.
• Considering the timing of the release and related indicators, strategically trading is the key to success.
• Analyzing past NFP data and improving trading strategies is essential.

Finally

Make sure you understand how to use NFP and trade wisely.

Reference Sites

EXPO blog 投資の翼

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