Nonfarm Payroll

What Are Nonfarm Payrolls?

Nonfarm payrolls is the measure of the number of workers in the U.S. excluding farm workers and workers in a handful of other job classifications. This is measured by the Bureau of Labor Statistics (BLS), which surveys private and government entities throughout the U.S. about their payrolls. The BLS reports the nonfarm payroll numbers to the public on a monthly basis through the closely followed “Employment Situation” report.

In addition to farm workers, nonfarm payrolls data also excludes some government workers, private households, proprietors, and non-profit employees.

U.S. Nonfarm payrolls were severely impacted by the COVID-19 global pandemic in March of 2020.

After more than a decade of growth, U.S. nonfarm payrolls shrunk by 701,000, and the unemployment rate rose to 4.4%.

Understanding Nonfarm Payrolls

While the name nonfarm payrolls insinuates that farm workers be excluded from the statistic, there are also several other categories that the BLS does not count when compiling nonfarm payrolls data. According to the BLS, nonfarm employee classifications account for approximately 80% of U.S. business sectors contributing to gross domestic product (GDP). While this represents a significant majority of the U.S. labor force there are some notable exclusions in addition to farm workers:

Analyzing the Monthly Report

The “Employment Situation” report is a closely followed monthly report released by the BLS on the first Friday of the month subsequent to data reporting collection. The BLS’s “Employment Situation” report is always released at approximately 8:30 a.m.

The monthly “Employment Situation” report is created from two comprehensive surveys: the Household Survey and the Establishment Survey. This results in two separate reports compiled together to form one comprehensive monthly report. The Household Survey provides the unemployment rate report as well as details on employment demographics. The Establishment Survey segment of the BLS’s “Employment Situation” report is also known as the nonfarm payrolls report, providing the headline number of new nonfarm payroll jobs added within the national economy.

Household Survey

Key components of the Household Survey include:

Establishment Survey

The Establishment Survey portion of the “Employment Situation” report provides details on nonfarm payroll additions and can be known as the nonfarm payrolls report. Key components of the Establishment Survey include:

Economic Analysis

The nonfarm payrolls number and the unemployment rate are headlines of the “Employment Situation” report but economists and policymakers use all of the available data for assessing the current state of the economy and forecasting future levels of economic activity. The report contains many valuable insights into the labor force that have a direct impact on the economy as well as the stock market, the value of the U.S. dollar, the value of Treasuries, and the price of gold.

Economists analyze the Household Survey data when considering the trend in the unemployment rate, participation rate, and other trends that may be associated with demographics. The Establishment Survey/nonfarm payrolls report offers valuable information on sectors with detailed sector segregation. Several types of analysts may incorporate sector-specific nonfarm payroll data into their analysis. This breakdown can often be used by stock analysts reporting on stock sectors and earnings releases.

Wages and wage growth found in the Establishment Survey are also of high importance to economists. Historically, the best month for wage growth is usually May, with an average of 129,000 additional jobs. August is the worst month, with an average of 69,000 added jobs. For nonfarm payrolls, the year 1994 was the best on record with 3.85 million jobs added. In 2009, the job force lost 5.05 million jobs, marking the worst statistical year for the nonfarm payroll count. In 2018, payroll employment growth totaled 2.6 million compared to additions of 2.2 million in 2017 and 2.2 million in 2016.