What Is Nonfarm Payroll?

What Is Nonfarm Payroll?

Let me explain nonfarm payroll directly: it measures the number of workers in the U.S. economy, but it leaves out farm employees, self-employed individuals, volunteers, private household workers, sole proprietors, and active military service members.

The Bureau of Labor Statistics (BLS) gathers this data by surveying private and government entities across the country about their payrolls. You see these nonfarm payroll numbers reported monthly in the employment situation summary, which is a report that gets a lot of attention.

Key Takeaways

Nonfarm payrolls account for roughly 80% of the workers who contribute to the U.S. gross domestic product (GDP). It specifically excludes farmworkers and several other job types, including active-duty military members.

The BLS collects this data and includes it in their monthly employment situation report. That report draws from two main surveys: the household survey and the establishment survey.

Understanding Nonfarm Payroll

As per the BLS, these nonfarm employee categories make up about 80% of the workforce driving GDP. Beyond farmworkers, the exclusions include government-appointed officials and employees from agencies like the CIA, NSA, National Geospatial-Intelligence Agency, and Defense Intelligence Agency—though other civilian government employees are counted.

Active military service members are out, as are private household employees, domestic workers, unincorporated business owners like sole proprietors, self-employed workers without registered businesses, and nonprofit employees.

Employment Situation Summary

This is the monthly report from the BLS that everyone watches, released on the first Friday of the month after data collection. It comes from two big surveys: the household survey, which gives the unemployment rate and employment demographics, and the establishment survey, which highlights new nonfarm payroll jobs added to the economy.

Household Survey

In the household survey, you get key details like the overall unemployment rate, plus breakdowns by gender, race, education, age, and reasons for unemployment. It also covers employment in alternative types and the participation rate.

Participation Rate

The labor force participation rate tells you about the active workforce: it's the number of people 16 and older who are employed or seeking work, divided by the total noninstitutionalized civilian working-age population.

Establishment Survey

This part focuses on nonfarm payroll additions for the month, broken down by industry categories like durable goods, nondurable goods, services, and government. It also includes details on hours worked and average hourly earnings.

Nonfarm Payroll Data and Economic Analysis

The headlines are nonfarm payroll additions and the unemployment rate, but economists and policymakers dig into all the data to evaluate the economy and predict future activity. This report provides insights that affect the labor force, stock market, U.S. dollar value, Treasuries, and gold prices.

From the household survey, you see trends in unemployment and participation linked to demographics. The establishment survey shows job changes in specific sectors.

How Do Nonfarm Payrolls Impact the Financial Market?

The report's data helps identify trends in economic growth, inflation, housing starts, and GDP, all of which drive movements in financial markets.

When Are Nonfarm Payrolls Released?

They come out on the first Friday of each month at 8:30 a.m. Eastern time, covering the previous month's data.

Is Nonfarm Payrolls a Leading or Lagging Indicator?

It's not a leading indicator; instead, it gives a snapshot of events that influence the overall economy.

The Bottom Line

Nonfarm payroll counts jobs in the private sector and government agencies, excluding farmworkers, private household employees, proprietors, nonprofit workers, and active military. These numbers are in the monthly employment situation report, detailing unemployment changes by sector and demographic, plus new jobs added to the economy.