The jobs report: the number that moves everything
Three figures come out at once, and the one markets watch is not the one that makes the headlines.
Three figures, three stories
New jobs show whether the economy is expanding. A strong number means healthy demand.
The unemployment rate looks more important, but it is trickier: it can fall because people found jobs, or because they gave up looking and dropped out of the statistics.
Wage growth is what the central bank watches. Wages rising faster than productivity feed into prices, and that is inflation that does not go away on its own.
Why good news is sometimes bad
In periods when the central bank is fighting inflation, a very strong jobs report can push markets down.
The logic: a hot economy means wage pressure, which means persistent inflation, which means rates staying high for longer, which means lower valuations.
So the same number reads differently depending on the circumstances. In a slowdown, the same strong report would be excellent news.
Mind the revisions
Jobs figures are revised twice after the first release, and the revisions are often large — tens of thousands of jobs.
A single month carries a lot of noise. The three-month average is far more reliable than any individual release.
Markets still react sharply to the first number and barely at all to the revision, even though the second is more accurate.
Key terms in this lesson
- Nonfarm payrolls
- The number of jobs created in a month, outside farming. The most watched release in the US.
- Unemployment rate
- The share of people looking for work who cannot find it. It does not count those who have given up.
- Wage growth
- How fast wages are rising. When it outpaces productivity, it feeds into prices.
- Participation rate
- The share of the working-age population that is employed or looking for work.
Quick check
Unemployment falls, but the participation rate falls too. What has most likely happened?
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