Nonfarm productivity measures the output per hour worked by employees in the nonfarm business sector. This metric excludes farm workers, private household employees, and non-profit organisation workers. It’s a key indicator of economic health, reflecting how efficiently labour is utilised in producing goods and services.
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Why Nonfarm Productivity Matters in Forex Trading
In the forex market, traders closely monitor this data. In most cases an increase in productivity suggests that the economy is growing efficiently, which can lead to a stronger currency.
Conversely, declining productivity may signal economic challenges, potentially weakening the currency. Therefore, understanding this metric helps traders in analysing and making informed trading decisions.
How Nonfarm Productivity Affects Economic Indicators
This influences several economic factors, and they include:
Inflation
Higher productivity can lead to lower production costs, helping to keep inflation in check.
Gross Domestic Product (GDP)
Increased productivity contributes to GDP growth, indicating a robust economy.
Labor Costs
When productivity rises, unit labour costs may decrease, benefiting businesses and consumers.
Frequently Asked Questions
What is included in nonfarm productivity?
It measures the output per hour worked in the nonfarm business sector, excluding agriculture, private households, and non-profit organizations.
How does this impact the forex market?
Changes in this can influence a country’s currency value. Higher productivity may strengthen the currency, while lower productivity can have the opposite effect.
When is this data released?
In the United States, the Bureau of Labor Statistics releases this data quarterly.
Conclusion
Nonfarm Productivity measures the annualized change in labor efficiency when producing goods and services, excluding the farming industry. A drop in a worker’s productivity directly increases their wage, linking productivity to labor-related inflation.
A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.
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