nonfarm payrolls

Nonfarm payrolls refers to the number of people employed in the U.S. non-agricultural sector. It is one of the most important indicators of the U.S. economy. The data for the previous month is released on the first Friday of each month. The number of non-farm payrolls reflects the employment and production situation of the U.S. economy. It has a major impact on the U.S. Federal Reserve's monetary policy and the U.S. dollar exchange rate, and can also cause fluctuations in global stock markets.

The Economic Significance of Changes in Nonfarm Employment

The number of non-agricultural employment covers the industrial and commercial units of the U.S. economic entities, including factories, offices, stores, governments, etc., accounting for more than 90% of the U.S. employed population. Changes in nonfarm employment can reflect companies' expansion or contraction of production, as well as hiring more or fewer workers. The income and spending of these workers affects U.S. economic growth, since consumption accounts for about 70% of U.S. GDP.

Generally speaking, an increase in non-farm employment means that the U.S. economy is recovering or growing, the unemployment rate is falling, people's willingness to consume is increasing, and corporate profits are increasing. These are all factors that are positive for the dollar and the stock market. On the contrary, the decrease in non-farm employment means that the U.S. economy is in recession or slowing down, the unemployment rate is rising, people's willingness to consume is reduced, and corporate profits are declining. These are all negative factors for the dollar and the stock market.

The impact of changes in non-farm employment on the stock market

The impact of changes in non-farm payroll employment on the stock market is not static, but depends on the difference between market expectations and actual data, as well as other related indicators such as the unemployment rate, average hourly wages, average working hours, etc. Generally speaking, if non-farm payrolls increase more than expected, the stock market will rise; if non-farm payrolls rise less than expected, the stock market will fall. But this also depends on whether other indicators are in line with market expectations, as well as the Federal Reserve's interpretation and policy response to non-farm data.

For example, in the August non-farm employment report released on September 3, 2021, new non-farm employment was reported at 311,000, which was far lower than the expected 205,000 and lower than the previous value of 504,000. This number shows that the U.S. economic recovery has been hindered by the new crown epidemic and supply chain problems. However, the unemployment rate was 3.6%, lower than expected and the previous value of 3.4%; the average hourly wage increased by 3.1% annually, higher than expected and the previous value of 2.9%; the average working hour was 34.5 hours, in line with expectations. These indicators show that the U.S. labor market remains tight and wage pressures are rising. In this case, the market believes that the Fed may not delay reducing the asset purchase program (QE) due to poor non-farm performance, but may pay more attention to inflation risks. Therefore, U.S. stocks rebounded after the release of the non-farm payrolls report.

The impact of changes in non-agricultural employment on Taiwan's stock market

Since Taiwan is an export-oriented economy, it has close trade and investment relations with the United States. According to statistics from the International Trade Bureau, Taiwan's exports to the United States accounted for 13.59% of Taiwan's total exports in 2020, making it Taiwan's second largest exporting country. Therefore, the Taiwan stock market will also be affected by changes in U.S. non-farm payroll employment.

Generally speaking, if the number of U.S. non-farm employment increases more than expected, it means that the U.S. economy is improving and consumer demand is increasing, which is beneficial to Taiwan's exports. At the same time, if the U.S. stock market rises, it will also drive the Taiwan stock market to follow suit. On the contrary, if the increase in U.S. non-farm employment is lower than expected, it means that the U.S. economy will deteriorate and consumer demand will decrease, which will be detrimental to Taiwan's exports. At the same time, if the U.S. stock market falls, it will also drag down the Taiwan stock market.

However, in actual operations, other factors such as exchange rates, interest rates, inflation, political risks, etc. must also be considered for their impact on the Taiwan stock market. In addition, when analyzing the non-agricultural report, attention should also be paid to details such as its revision value and seasonal factors.

Conclusion

The change in non-farm payroll employment is an important and complex economic indicator. When analyzing its impact on the U.S. economy and stock market, as well as the Taiwan stock market, its connotation and denotation must be considered in many aspects. This article only provides a basic framework and direction for reference.