The U.S. Bureau of Labor Statistics releases a monthly report detailing the available employment data that tracks nonfarming job growth in the United States. Employment data is one of the most significant economic indicators to track. The report is released on the first Friday of every month for the prior month.
What does the job report tell us?
The estimated participation rate
The participation rate is the estimated percentage of people who are currently working or looking for work.
Average worker earnings
An indication of how much workers in the U.S. are getting paid and the fluctuation of the pay.
Average number of hours people tend to work per week
The average workweek indicates the hours people work over a week.
Unemployment rate or estimation of how many people are looking for work
This number only counts the people who are actively looking for jobs.
How can the job report help investors?
Investment firms and individual traders examine the jobs report for several different reasons. It depends on where you invest and your financial goals. Data-driven Investors analyze the numbers and look for indicators of market momentum or stagnation, such as:
- The possibility of a slowdown in job growth and a cooling in wage pressure is encouraging for the policymakers at the Federal Reserve (Fed) to cut interest rates, boosting the economy.
- A hot job market may cause the Fed to consider raising its benchmark interest rate or keeping it higher for longer.
- Some data-driven investors focus on particulars like wages, hours worked, or where job expansion occurs. For example, the average length of the workweek and average hourly earnings growth are used to identify wage growth to forecast the consumer's health.
The report may also be used to forecast other economic factors like the health of a business or consumer demand for a product or service. However, the jobs report isn't, in itself, the entire determinant of the economy's condition and requires further research and investigation. The employment numbers are a place to start projecting the market's future. The reality is that there is no way to predict how the market will behave, and therefore, investing will always involve risk, no matter what form of investing you pursue.
Consult a financial professional
Analyzing the jobs report, how the numbers get calculated, and what they mean require a certain amount of insight, especially if you plan to use these numbers as a basis for your financial decision-making. The numbers can be drilled down into more detailed information, from company performance to the yield curve and consumer confidence index. Investing already involves significant risk, including possible loss of principal, and misunderstanding information in the jobs report could damage your financial situation.
Consider scheduling an appointment with your financial professional to review the jobs report and determine how that data could benefit in creating or modifying your investment strategy while helping to mitigate risks and mistakes before they impact your investment goals.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
Sources:
Jobs and unemployment | Economic Policy Institute (epi.org)
Leading Indicators: Definition and How They’re Used by Investors (investopedia.com)
Why the Jobs Report Matters to Investors: What to Loo... - Ticker Tape (tdameritrade.com)
The Effect of the Job Market on the Economy | U.S. Bank (usbank.com)
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