It’s the first Friday of the month, 8:29 AM ET. All over the world, institutional traders are staring at their screens like they are extras in the Apollo 13 command room. The poor intern is confused at the respite from the non-stop bullying. The senior rainmakers are too busy sweating to care.
The Bureau of Labor Statistics, or BLS, is about to release a number that can move trillions in assets, in seconds.
That number is Nonfarm Payrolls (NFP). And if you're not watching it, you're missing the most important 60 seconds of monthly market action.
The Most Important Economic Indicator
Nonfarm Payrolls (NFP) measures how many people got hired or fired in the U.S. last month, minus farmers and a few other categories the government decided not to count.
It's the best real-time snapshot we have of whether the US economy is creating jobs or destroying them.
The reason this matters is because jobs drive everything. People with jobs spend money. People spending money keeps companies profitable. Companies staying profitable keeps the economy growing. The Fed watches this data obsessively because employment is literally half their mandate (the other half being price stability).
The NFP report contains several components that traders worship like ancient prophecy:
The Headline Payroll Number: Net jobs added or lost. This gets the most attention and usually drives the initial market reaction. Consensus expects around ~150k-200k monthly additions in a healthy economy.
Unemployment Rate: The percentage of people actively looking for work who can't find it.
Average Hourly Earnings (AHE): How much workers are getting paid per hour. This is the Fed's favorite inflation early warning system. Rising wages often lead to rising prices, which in turn lead the Fed to think about inflation.
Revisions: The BLS revises the previous two months' data, and these revisions can be massive. The July NFP revised June’s number from +147k to +14k, a -133k swing that sent bonds rallying and equities dropping as traders realized the economy wasn't as strong as they'd thought.
Industry Breakdown: Where the jobs are being created or destroyed. Services growing while manufacturing shrinks tells a different story than broad-based growth across sectors.
NFP = Signal
It moves everything in the market.
Currencies: The dollar moves on interest rate expectations. Strong NFP typically strengthens the dollar because higher rates make dollar assets more attractive. Weak NFP does the opposite.
Equities: Here's where it gets interesting. High payrolls can be good (healthy economy) or bad (Fed tightening fears). Low payrolls can be bad (recession fears) or good (Fed easing hopes). The market's reaction depends on which narrative dominates at the time.
Commodities: Gold hates strong NFP because it reduces safe-haven demand and raises rate expectations. Oil usually loves strong NFP because it signals economic growth and energy demand. Usually...
Bonds: NFP directly influences Fed policy expectations. Strong jobs = potential rate hikes = bond yields up = bond prices down. Weak jobs = potential rate cuts = yields down = bond prices up.
Here's the key insight that separates professional traders from everyone else:
NFP trading isn't about whether the number is high or low. It's about whether the number beats or misses expectations.
Markets theoretically operate on the ‘efficient market’ hypothesis - current asset prices take into account all known information. If consensus expects 150k jobs and we get exactly 150k, prices shouldn't move because that outcome was already reflected in asset values.
But if consensus expects 150k and we get 200k?
That's a 50k "beat" that wasn't priced in. Equities might rally on economic strength, or sell off on Fed tightening fears. Bonds will likely sell off as rate expectations rise. The dollar will probably strengthen.
If we get 100k instead? That's a 50k "miss" that triggers the opposite reactions.
The magnitude of the surprise often matters more than the absolute level of the number.
Respect the Volatility
NFP represents one of the purest examples of information-driven market volatility in modern finance. It's a real economic data point that directly influences central bank policy, released at a specific time when all market participants are watching.
This creates a perfect storm for large price movements across all asset classes. Currencies can move 100+ pips in seconds. Bond futures can gap multiple ticks. Equity indices can easily swing 1-2% in minutes.
Whether you're trading it or just trying to understand why markets occasionally lose their minds on Friday mornings, NFP deserves your attention. It's a monthly reminder that markets are ultimately driven by real economic fundamentals, even in an age of algorithmic trading and central bank intervention.