Employment - Payroll Jobs

Importance: ****

Definition: The government's employment report is the most significant monthly economic indicator reported. While the GDP report may be more important, it is published only quarterly rather than monthly as the employment report.. Its importance derives from the fact that it provides a signal early each month about the employment conditions in he previous month and it sets the tone for the entire month. It has been referred to as "the king of kings," as it provides information on employment, the average workweek, hourly earnings, and the unemployment rate. The most watched employment figure is the one relative to the seasonally adjusted total nofarm employment as farming is subject to high seasonal volatility.
Graphics enabled browser required.

Related Indicators:  average workweek, average hourly earnings, and the unemployment rate.

Source: Department of Labor

Frequency: Monthly

Availability: About one week following the reported month.

Direction: Pro-cyclical

Timing: Coindicent indicator

Volatility: Moderate

Likely Impact of Financial Markets:

Ability to Affect Markets: Strong as it is both an important indicator and one of the earliest signals of economic acitivity in the previous month. Greenspan reads carefully the employment report in considering  changes in monetary policy. Lately, in addition to the usual indicators, employment, average workweek, average hourly earningsunemployment rate, other components of the report have been subject to analysis and scrutiny such as the "voluntary quit rate".
    Traditionally, the U.S. economy's average growth rate of employment has been around 1-1.3%. As labor productivity growth has been also around 1-1.2% per year (while the average workweek constant), this is is why many economists believe that 2-2.5% represents the sustainable (or 'natural') long-run growth rate of potential output. Employment growth an economic growth above this 'natural' growth rate cannot be sustained for too long if productivity is constant: tightness in the labor market will cause wage inflation, lead to price inflation and lead the Federal Reserve to increase the Fed Funds rate to tighten monetary policy in order to slow growth and prevent a pickup in inflation. However, employment growth in the U.S. economy in 1996-1997 has been on average higher than 1% with both employment and average workweek growing closer to 2% while wage and price inflation have not picked up. Also, GDP growth has been  above 3% leading some to question the concept of a fixed 'natural' rate of growth. Trend increases in productivity growth or employment growth would lead to an increase in the sustainable rate of growth of GDP. A trend increase in employment growh may derive from higher labor force participation rate of some economic groups (women, ex-welfare recipients and the elederly). See the pages on productivity controversies and NAIRU for more on this debate.

Analysis of the Indicator:
The data covers the following major categories: Goods-Producing Manufacturing; Construction;    Mining; Service-Producing ; Transportation and Public Utilities; Wholesale Trade;  Retail Trade; Finance, Insuranse, and Real Estate; Services; Government The payroll jobs data are used to predict other economic indicators. For example, there is a strong correlation between construction payroll figures and housing starts, manufacturing and industrial production activity, total payroll and personal income. The data is also used to refine GDP estimates. While the payroll data is extremely important, it is subject to sizeable revisions.

Web Links

A Graph of the latest Employment - Payroll Jobs data from The Economic Statistics Briefing Room of the White House.

The latest Employment - Payroll Jobs report from BLS.

See the Dismal Scientist Homepage for charts, tables and analysis of the latest employment report.