Nonfarm payroll is a key employment statistic released by the US Bureau of Labor Statistics on the first Friday of every month, indicating the health of the US economy. It includes all workers except government, non-profit, domestic, and farm workers. The statistic is used by economists to track the business cycle and predict economic activity. The report also includes information on individual sectors, average hourly earnings, and revisions to previous reports.
Nonfarm payroll is one of several indicators of the business cycle calculated by the US Bureau of Labor Statistics, which is part of the US Department of Labor. Non-farm payroll is made up of all workers except government workers, private domestic (domestic) workers, employees of non-profit organizations, and farm workers. About 80 percent of the workers who produce the gross domestic product, or GDC, in the United States are defined as nonfarm workers. This key employment statistic is released on the first Friday of every month.
The Nonfarm Payroll is an indicator used by government and private economists to help determine the health of the United States economy. Another statistic provided by the Bureau of Labor Statistics is the birth-to-death ratio, which compares the number of new businesses that were started to the number of businesses that closed in a given period of time. Because new companies tend to create jobs at a faster rate than companies that have been in business for a long time, a high birth-death rate is indicative of a growing economy.
Like other economic indicators, the nonfarm payroll number will fluctuate over the course of the business cycle. During periods of recession or negative economic growth, the nonfarm payroll will decline. Economists see a rise in the nonfarm payroll, after several periods of decline, as a sign of recovery. Employment is a trailing indicator, which means that an increase in jobs only occurs after an economy has begun to recover from a period of recession. By tracking this metric over the course of the economic calendar, a recession and its recovery can be identified.
In addition to being used as a proxy for the United States government, the Nonfarm Payroll is used by The Conference Board to analyze and predict economic activity. The Conference Board is a private, not-for-profit entity that uses government statistics and its own research to provide business intelligence to the private sector. The Conference Board produces some of its own economic metrics, such as the Consumer Confidence Index, which are also used by government and private companies.
The nonfarm payroll statistic also includes information on those individual sectors, indicating which jobs lost and which gained jobs. The report includes average hourly earnings, which can indicate the likelihood of inflation. The report may also include revisions to previous reports if they have been found to be inaccurate or incomplete for any reason.
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