MARKET ANALYSIS
Employment
Employment refers to the amount of available labour resources that are being used in the most economically efficient manner. It is normally viewed from the opposing angle of unemployment as full employment is rarely achievable, except potentially during an expansive inflationary period.
Figures based on employment levels can often influence the markets and are therefore important for spread betters to consider when looking to place their financial trades.
Unemployment figures do not include full-time students, persons retired, children or those not actively seeking employment.
Unemployment can be placed into three categories; frictional, cyclical and structural. Frictional arises from people moving between jobs, careers, and locations.
Cyclical occurs when the unemployment rate moves in the opposite direction as the GDP growth rate while structural develops from there being an absence of demand for the workers that are available. So when GDP growth is small (or negative) unemployment is high.
The key figures relating to employment are the Non-farm Payrolls figure from the US which is released usually on the first Friday of the month and the UK Claimant Count and Unemployment Rate figures from the UK.
Other important indicators to consider in this area include US Weekly Initial Jobless claims and US ADP Employment report.
Non-farm Payrolls
Country
Type
Employment
Announced
Monthly, usually the first Friday after the month ends
Description
One of the most closely-watched market indicators by investors and those interested in financial spread betting, non-farm payrolls is the key component of the larger ‘Employment Situation’ report, counting the change in the number of paid employees working full or part-time in US businesses and government, excluding the farming sector.
Therefore, it encompasses all major sectors of the economy and is seen as the primary monthly indicator of aggregate economic activity, providing further perspective to income and production.
Increases in employment translate directly into economic growth, though rapid employment increases can spark fears of inflationary pressure if production for goods and services does not keep up with the increased demand.
Changes are measured on a month-to-month basis. A monthly gain of 150k is considered relatively healthy.
Unemployment Rate
Country
Type
Employment
Announced
Monthly
Description
The unemployment rate represents the number of unemployed persons expressed as a percentage of the labour force. The unemployment rate for a particular age/sex group is the number of unemployed in that group expressed as a percentage of the labour force for that group.
The definition for an unemployed person is a person who is 16-65 years old who were available for work but did not work during the survey week, and who made specific efforts to find a job within the previous 4 weeks.
UK Claimant Count
Country
Type
Employment
Announced
Monthly
Description
By examining the number of people claiming unemployment benefits but actively seeking work, this report gives the clearest idea of the state of the UK labour market.
However, it does not conform to the ILO standards of reporting. The sector breakdown contained within the report can be of use to equity investors when deciding areas in which to invest.
US Weekly Jobless Claims
Country
Type
Employment
Announced
Every Thursday
Description
The main number in this report shows how many individuals filed for unemployment insurance for the first time in the previous week.
Markets look at the change from the previous week as well as the 4-week average to determine short term trends in the labour market.
US ADP Employment Report
Country
Type
Employment
Announced
Monthly, around 2 days after the month end
Description
This report acts as a sneak-peek into the full non-farm payrolls report two days later. It only contains private sector (ie ex-government) figures.
Insights on wage trends and wage inflation can signal a rise in interest rates, triggering a fall in bond and stock prices.
Slow or negative job growth can again influence policymakers to slash interest rates, which in turn advances bond and stock prices.
