The labor market refers to the supply of and the demand for labor, where employees provide the supply and employers – the demand.
The labor market is a key factor for the well-being of the economy.
A high employment rate means stable income for the citizens, high living standard, sustainable purchasing power and all that translates to prosperous economy and high GDP. From a macroeconomic point of view, the labor market is influenced by the educational level and the age of the population, immigration, etc. On a microeconomic level the factors that affect the labor market are working hours, wages, working conditions, benefits, etc.
There are a number of fundamental indicators that help evaluate the state of the labor market.
They measure its “health” and mark the changes in the employment conditions. Because the US economy is the world’s biggest, its employment data is monitored closely.
One of the most important reports is the Employment Situation Report.
It is published monthly, at 8:30 a.m. EST on the first Friday of the month and includes information about the previous month. The jobs report (as it is known) is considered a good tool for gauging the current state of the labor market via its indicators.
The Non-farm Payrolls is the single most widely followed piece of data from the jobs report.
It represents the number of new workers (or jobs) added for the period, excluding farm employees, government employees, private household employees and employees of nonprofit organizations. The NFP also provides data on the unemployment rates, details on hours worked and average hourly earnings, and other.
The expectations for the next NFP report are often priced in the forex market prior to the release of the jobs report itself.
Yet, divergences between projections and reality could lead to volatile movements in the currency markets.
Another important indicator from the jobs report is the Unemployment rate report.
It represents the percentage of the eligible work force that is unemployed but is actively seeking employment.
High unemployment levels mean jobless people with no income, which lowers consumer spending. Too low levels are also bad for the economy, because that would push wages up, potentially causing the economy to overheat and inflation to rise.
A jobless rate of about 4-6% is considered good for the economy.
The Jobless claims report is published weekly (every Thursday) by the U.S. Department of Labor and counts the people filing to receive unemployment insurance benefits.
There are two categories within the report. The first is the Initial, which gives data about the people filing for the first time, and the second is the Continuing, which comprises unemployed people who have been receiving unemployment benefits for some time.
Jobless claims report is an important leading indicator on the state of the employment situation.
Although the information is highly volatile due to the short period for sampling (one week), it provides quick and timely information about the labor market.
