US non-farm data is an important economic indicator released monthly by the US Department of Labor, officially known as 'Nonfarm Payrolls (NFP)'. It reflects the number of new jobs created outside the agricultural sector and the unemployment rate, measuring the health of the US labor market.
Non-farm data is a focal point for global markets as it directly reflects the level of activity in the US economy and indirectly affects the global economy.
Non-farm data is released on the first Friday of every month.
Composition of non-farm data
Non-farm employment numbers:
Indicates the number of jobs added or lost in the US non-farm sector in the previous month. This figure reflects the growth or decline of the US economy.
If data increases: Indicates a healthy economic condition. Theoretically, it should be favorable for the exchange rate and may suggest a rise in the US dollar, along with higher interest rates.
If data decreases: It reflects a sluggish job market and economy, negative for the US dollar, leading to US dollar depreciation.
Unemployment rate:
Indicates the proportion of people in the labor market who are unemployed and actively seeking work compared to the total labor force.
➢ High percentage: Indicates a high number of unemployed in the market, reflecting a weak labor market. Negative for the US dollar / US dollar depreciation.
➢ Low percentage: Represents a low unemployment rate, fewer unemployed individuals, a positive indicator for the US labor market, and should be considered favorable for the US dollar / US dollar appreciation.
+ Average hourly wage:
Measures the change in hourly wages of workers in the US non-farm sector, reflecting wage growth and inflation levels. It assesses the growth of labor costs.
➢ Good indicators: Reflect the growth of personal income for the month. ➢ Decreased indicators: Reflect a decline in personal income for the month.
Impact of non-farm data:
[Impact on US Dollar Exchange Rate]
When non-farm employment increases, it indicates a strong US economy, which usually leads to the appreciation of the US dollar; conversely, a decrease in employment may trigger a depreciation of the US dollar.
[Monetary Policy of the Federal Reserve]
Good non-farm data may lead the Federal Reserve to consider raising interest rates to curb inflation; conversely, if the data is poor, the Federal Reserve may maintain low interest rates to stimulate the economy.
[Global Stock Markets]
Good non-farm data usually boosts investor confidence, driving up global stock markets; poor data, on the other hand, may lead to declines in the stock market.
[Bond Market]
When non-farm data performs well, market optimism about the economy can lead to rising bond yields and falling bond prices. Poor non-farm data may lead to falling bond yields and rising bond prices.
[Foreign Exchange Market]
The foreign exchange market is very sensitive to non-farm data. The US dollar usually strengthens when non-farm data is strong and weakens when non-farm data is poor.
[Commodity Futures Market]
Changes in non-farm data will further affect the prices of commodity futures priced in US dollars, such as gold and crude oil. A stronger dollar usually suppresses gold prices because gold is priced in dollars, making it more expensive for investors holding other currencies.
[Capital Flows]
Sudden changes in non-farm data may trigger shifts in global capital flows, thus impacting the A-share market. Strong non-farm data may enhance global investors' confidence in US dollar assets, causing some capital to flow back from emerging markets to the US market.
Impact on us:
+ Foreign exchange market
Strong non-farm data pushes up the US dollar, potentially leading to the depreciation of the Renminbi, increasing the cost of imported goods, and affecting China's export competitiveness.
+ Capital markets
Good non-farm data may lead the Federal Reserve to adopt a more hawkish monetary policy (such as interest rate hikes), which may trigger capital flows from emerging markets to the US and impact China's stock and bond markets.
+ Commodity prices
A stronger US dollar may suppress the prices of commodities such as gold and crude oil, thereby affecting the production costs of related industries in China.
Impact on the lives of ordinary people:
Price fluctuations
If the US dollar strengthens, the depreciation of the Renminbi may lead to rising prices of imported goods, such as gasoline, food, electronics, etc., affecting the cost of living.
Investment and financial management
Fluctuations in the global market may affect residents' investment returns in stocks, funds, and foreign exchange. + Costs of outbound travel and studying abroad
The depreciation of the Renminbi will lead to increased costs for overseas travel and study, raising the family burden. ◆ Employment environment
If Chinese enterprises are affected by adjustments in US economic policies, it may indirectly impact the employment market, especially in foreign trade-related industries.
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