Nonfarm Payrolls: The Monthly US Jobs Report

Key Takeaways

• Nonfarm payrolls counts paid jobs added or lost across the economy, excluding farm work and a few other categories.
• It comes from the establishment survey of about 119,000 businesses, separate from the household survey that sets the unemployment rate.
• The headline number is revised twice in later releases, so the first print is an estimate, not a final figure.
• A strong or weak payrolls report can move stocks, bonds, and the dollar within seconds of release.

What It Is

Nonfarm payrolls comes from the Current Employment Statistics program at the Bureau of Labor Statistics. Each month the BLS surveys about 119,000 businesses and government agencies, covering roughly 622,000 worksites, and counts everyone who worked or got paid during the reference pay period. This is the establishment survey, also called the payroll survey.

The name excludes farm workers, private household employees, and a few other groups whose hiring patterns are too seasonal or hard to measure cleanly. What is left is the broad count of payroll jobs in factories, offices, stores, and government. The report lands on the first Friday of most months and covers the prior month.

The Intuition

Jobs drive spending, and spending drives the economy. When employers add payrolls, more people earn paychecks, which feeds demand for goods and services. When payrolls shrink, the reverse happens. That is why markets and the Federal Reserve watch the number so closely.

The jobs report actually contains two separate surveys. The establishment survey produces the payrolls count. A separate household survey, which polls about 60,000 households, produces the unemployment rate. The two can tell slightly different stories in any month because they measure different things from different samples. Payrolls counts jobs; the household survey counts employed people, including the self-employed that payrolls miss.

How It Works

The payrolls figure is the net change in jobs from one month to the next. The BLS does not count every job in the country. It samples businesses, then scales the sample up to the full economy and applies a model for new business formation and closures.

nonfarm payrolls change = jobs added this month - jobs lost this month

Two features matter for reading the number. First, it is seasonally adjusted, so predictable swings like holiday hiring are removed to reveal the underlying trend. Second, each month's figure is revised in the next two reports as more survey responses arrive, and the whole series is benchmarked annually to tax records. The first print can move tens of thousands of jobs by the final revision.

Worked Example

Suppose the report shows total nonfarm employment rose from 159.20 million to 159.38 million, seasonally adjusted.

payrolls change = 159.38 million - 159.20 million = 180,000

The headline reads plus 180,000 jobs. To judge it, compare against expectations and the recent trend. If forecasts were 220,000 and the three-month average was 200,000, then 180,000 is a soft print despite being positive, and markets may read it as cooling. Also check the revisions to the prior two months, which can quietly add or subtract more jobs than the headline surprise.

Common Mistakes

1. Ignoring revisions. The first print is an estimate. A strong headline can be undone by big downward revisions to prior months buried in the same release.

2. Confusing the two surveys. Payrolls comes from the establishment survey; the unemployment rate comes from the household survey. They can disagree in a given month because the samples and definitions differ.

3. Reading the level instead of the change. Markets trade the monthly change versus expectations, not the total employment level. Context against forecasts is everything.

4. Forgetting seasonal adjustment. The reported figure is adjusted. The raw, unadjusted count swings wildly with holidays and school calendars and should not be compared directly.

5. Treating one month as the trend. Payrolls is noisy month to month. The three- and six-month averages give a cleaner read on the labor market's direction.

Frequently Asked Questions

What is nonfarm payrolls in simple terms? Nonfarm payrolls is the monthly count of how many paid jobs US employers added or cut, excluding farm work. It is the headline number in the government's jobs report.

How does nonfarm payrolls affect investment decisions? A strong payrolls number can push bond yields and the dollar up on expectations of tighter policy, while a weak one can do the reverse. Traders position around the surprise versus forecasts and the revisions to prior months.

What is a real-world example of nonfarm payrolls? If employment rises from 159.20 million to 159.38 million, the report shows a gain of 180,000 jobs for the month.

How can investors use nonfarm payrolls effectively? Read the monthly change against expectations, check the revisions to prior months, and lean on three-month averages to smooth the noise. Pair it with wage growth in the same report.

How is nonfarm payrolls different from the unemployment rate? Nonfarm payrolls counts jobs from the establishment survey of businesses. The unemployment rate counts jobless people from a separate household survey, so the two can move differently.

Sources

1. U.S. Bureau of Labor Statistics. "Employment Situation Summary." https://www.bls.gov/news.release/empsit.nr0.htm
2. U.S. Bureau of Labor Statistics. "Current Employment Statistics - CES (National)." https://www.bls.gov/ces/
3. U.S. Bureau of Labor Statistics. "Employment Situation Technical Note." https://www.bls.gov/news.release/empsit.tn.htm
4. Federal Reserve Bank of St. Louis. "All Employees, Total Nonfarm (PAYEMS)." https://fred.stlouisfed.org/series/PAYEMS

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.