What Is Nonfarm Payrolls?

Nonfarm Payrolls (NFP) is a widely cited economic indicator that represents the total number of paid U.S. workers in the economy, excluding employees in the farming industry, private household workers, nonprofit employees, and certain government roles. Published monthly by the U.S. Bureau of Labor Statistics (BLS) as part of the Employment Situation Report, the NFP figure is a core component of labor market analysis and serves as a barometer of economic health. It measures job creation and loss across sectors such as manufacturing, construction, retail, education, healthcare, and professional services.

Financial professionals, policymakers, and market participants closely monitor changes in nonfarm payrolls to assess economic momentum, potential inflationary pressures, and to anticipate shifts in monetary policy. Because labor market strength often correlates with consumer spending and economic expansion, NFP reports can have a significant impact on financial markets.

Data Sources and Methodology

The NFP data is compiled through the BLS’s Establishment Survey, officially called the Current Employment Statistics (CES) survey. This survey collects data from a sample of approximately 122,000 businesses and government agencies covering around 666,000 individual work sites. Respondents provide information on employment, hours worked, and earnings. The data collected is then seasonally adjusted to account for predictable fluctuations, such as school calendars or holiday hiring, to provide a clearer view of underlying trends.

Importantly, the NFP number is subject to revision. Initial estimates are released on the first Friday of each month and may be revised in the two subsequent months as additional data is received. These revisions can sometimes significantly alter the perception of current labor market conditions.

What’s Included and What’s Not

The “nonfarm” designation is intended to exclude sectors where employment trends tend to be highly seasonal or not representative of broader economic activity. Specifically, the NFP figure excludes:

• Agricultural workers, due to the volatility and seasonality of farm employment.
• Self-employed individuals and unpaid family workers.
• Private household employees such as nannies or housekeepers.
• Active-duty military personnel.
• Employees of intelligence agencies and some specific government roles that are difficult to track via surveys.

In contrast, the NFP report includes workers in a wide range of industries, including goods-producing sectors like manufacturing and construction, and service-providing sectors such as education, health services, financial activities, hospitality, and government employment at federal, state, and local levels.

Role in Economic Analysis

Nonfarm Payrolls are a critical measure for analyzing employment trends, economic growth, and business cycle progression. Increases in nonfarm payrolls typically signal business expansion, higher consumer confidence, and stronger economic performance. Declines, on the other hand, may indicate weakening demand, employer cost-cutting, or economic contraction.

Economists often compare the NFP figures with other labor market indicators such as the unemployment rate, labor force participation rate, and average hourly earnings to gain a more complete picture of the employment environment. For instance, strong job growth accompanied by stagnant wage growth may suggest that while more jobs are being created, they may not be high-quality or well-paying positions.

The Federal Reserve closely monitors nonfarm payrolls when determining interest rate policy. A rapid pace of job growth can contribute to inflationary pressure, especially if it leads to higher wages. Conversely, weak job growth may prompt the Fed to adopt a more accommodative monetary stance to stimulate economic activity.

Market Relevance and Timing

The release of the Nonfarm Payrolls report often causes immediate volatility in financial markets. Traders in equities, bonds, and currencies react quickly to any deviations from expectations. A stronger-than-anticipated NFP number can push stock prices higher, raise bond yields, and strengthen the U.S. dollar, while a weaker report can lead to the opposite.

Market participants typically form expectations based on private-sector employment reports (such as the ADP National Employment Report), jobless claims data, and macroeconomic forecasts. Because the report is released just once per month and has a direct influence on monetary policy expectations, it carries outsized significance compared to many other economic indicators.

Historical Significance

Nonfarm Payrolls have been collected since 1939, offering a long-term view of U.S. labor market trends. Over time, it has proven to be a reliable measure of economic recovery or decline. For example, during the 2008 financial crisis, the U.S. economy shed millions of nonfarm jobs, and the subsequent recovery was tracked in part through the steady monthly improvement in NFP data. Similarly, during the COVID-19 pandemic in 2020, NFP data showed an unprecedented decline of over 20 million jobs in a single month, followed by a volatile and uneven recovery.

The Bottom Line

Nonfarm Payrolls is one of the most important indicators of U.S. economic health, offering insight into employment trends across the vast majority of the economy. By excluding sectors prone to irregular swings, the report provides a stable and broad measure of job creation and business activity. Its release is a focal point for market watchers and policymakers due to its implications for consumer spending, inflation, and Federal Reserve decisions. Understanding the NFP data and its relationship to other labor market indicators is essential for interpreting the overall direction of the U.S. economy.