Employment Indicators

Employment indicators reflect the overall health of an economy or business cycle. In order to understand how an economy is functioning, it is important to know how many jobs are being created, what percentage of the work force is actively working, and how many new people are claiming unemployment. We have already mentioned, on the previous page, that it is also important to monitor the speed at which wages are growing.

Unemployment Rate

The unemployment rate is released monthly and consists of surveys of both business firms and households. The business firms survey consists of the payroll, workweek, hourly earnings, and total hours of manufacturing, retail, government jobs, and others. The household survey shows the overall labor force, and the number of people employed and unemployed. A decrease in unemployment signifies a maturing business cycle while an increase in unemployment signals a bust cycle. The unemployment rate is slow to change however, so fundamental traders look at other indicators for more immediate insights.

Nonfarm Employment Change

One of those indicators, which is released at the same time as the unemployment rate is the Nonfarm Employment Change. It measures how many new jobs were created the previous month. It is an easier number than unemployment to gauge the latest changes for labor in the economy. The currency markets anticipate this release every month.

Average Weekly Initial Claims for Unemployment Insurance

This indicator is also more sensitive than the unemployment indicator. It becomes the flip side of the nonfarm payroll change as it shows when people are losing their jobs and need to apply for unemployment insurance. When employment conditions worsen, this will be one of the leading indicators to keep an eye on. It is released weekly, unlike most other indicators which are released monthly.

Average Weekly Hours

Average Weekly Hours is a sample of other employment indicators which are not as important, but can give clues to state of the economy. The average weekly hours put in by manufacturing workers, usually leads the business cycle since employers adjust work hours before changing the workforce.

There are many other indicators worth learning about and following in order to trade fundamental news and releases. We have presented just a few, and explained why they are important to the currency markets.

In our next chapter, we will discuss technical analysis.