MARKET ANALYSIS
Employment
Overview
Employment indicators provide insights into the labour market's health, reflecting economic activity and overall economic conditions. Employment levels influence consumer spending and economic growth. A strong labour market is characterised by low unemployment and high job creation, signalling economic stability and growth.
Key Metrics
- Unemployment Rate: The percentage of the labour force that is unemployed and actively seeking work. A lower rate indicates a healthier economy.
- Nonfarm Payrolls: The total number of paid U.S. workers, excluding farm employees, government employees, private household employees, and employees of nonprofit organisations. This is a key indicator of job creation.
- Labor Force Participation Rate: The percentage of the working-age population that is either working or actively looking for work. A higher rate suggests a more robust labour market.
Implications
- Consumer Spending: Higher employment levels generally lead to increased consumer spending, as more people have disposable income.
- Policy Responses: Persistent unemployment may prompt government interventions and monetary easing, such as job creation programs or interest rate cuts, to stimulate the economy.
Factors Influencing Employment
- Economic Growth: A growing economy typically creates more jobs.
- Technological Advancements: Can both create and eliminate jobs, affecting employment dynamics.
- Globalisation: Outsourcing and global trade can influence domestic employment levels.
Education and Skills: The match between available jobs and workers' skills affects employment rates.
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.
