How to Calculate Non Farm Payroll
Non farm payroll (NFP) is a critical economic indicator that measures the number of jobs added or lost in the United States excluding the agriculture, mining, and government sectors. It is a significant component of the broader employment situation, and its fluctuations can have a substantial impact on the stock market and the overall economy. Calculating the non farm payroll involves several steps and requires access to specific data. In this article, we will guide you through the process of how to calculate non farm payroll.
Step 1: Obtain the Data
The first step in calculating the non farm payroll is to gather the necessary data. This data is typically provided by the U.S. Bureau of Labor Statistics (BLS) in the form of the monthly Employment Situation report. The report includes the total number of jobs added or lost in the non farm sector, as well as the unemployment rate.
Step 2: Identify the Non Farm Payroll Data
Once you have the data, you need to identify the non farm payroll figure. This figure is usually found in the “Total Non Farm Payroll” section of the report. It represents the total number of jobs added or lost in the non farm sector over the past month.
Step 3: Calculate the Month-over-Month Change
To understand the current state of the non farm payroll, you need to calculate the month-over-month change. This is done by subtracting the non farm payroll figure from the previous month’s non farm payroll figure. A positive number indicates an increase in jobs, while a negative number indicates a decrease.
Step 4: Adjust for Seasonal Variations
Seasonal variations can significantly impact the non farm payroll data. To account for these variations, the BLS adjusts the data using seasonal factors. These factors are applied to the raw data to smooth out the effects of seasonal changes, such as holidays, weather, and other recurring events.
Step 5: Analyze the Data
After adjusting for seasonal variations, you can analyze the non farm payroll data to gain insights into the current employment situation. For example, a strong non farm payroll figure can indicate a healthy economy, while a weak figure may suggest a slowdown in job growth.
Step 6: Consider Other Economic Indicators
While the non farm payroll is a crucial economic indicator, it is essential to consider other factors when analyzing the employment situation. Other economic indicators, such as the unemployment rate, consumer spending, and industrial production, can provide a more comprehensive picture of the economy.
In conclusion, calculating the non farm payroll involves obtaining the data, identifying the non farm payroll figure, calculating the month-over-month change, adjusting for seasonal variations, analyzing the data, and considering other economic indicators. By following these steps, you can gain a better understanding of the current employment situation and its potential impact on the economy.
