Part 4 · Employment and the economy · Lesson 19
Employment indicators: nonfarm payrolls and the unemployment rate
Every month on the first Friday, there is a number that global markets wait for with bated breath. Learn step by step the three numbers in the US jobs report and the order in which to read them.
QToday's question
US jobs grew far more than expected, so why did US stocks, and KOSPI the next day, fall?
More jobs sounds like good news, yet on the day the jobs report comes out, the stock market sometimes gets shaken instead. In this lesson, we start with what the jobs report measures, then build up to how to read its three numbers and how the market translates them into interest rates.
MAPLearning map for this lesson
We build it up in three steps. At the end of each step, a 'Quick check' lets you test your understanding before moving on.
In Lesson 5, the business cycle, you learned that employment falls during a recession, and in Lesson 6, leading, coincident and lagging indicators, that the unemployment rate is a lagging indicator that moves late. We also bring along the habit of 'comparing with the forecast' from Lesson 8, How to read CPI, and the Fed's 'two goals, inflation and employment' from Lesson 13, Central banks.
- STEP 1 · Basic conceptsWhat does the jobs report measure?
You will learn that and the come from two different surveys, and you will be able to calculate the unemployment rate yourself.
- STEP 2 · Understanding the mechanicsThe three numbers and revisions
You will be able to read job gains, the unemployment rate and together, and take into account that the first-reported numbers can change later.
- STEP 3 · Real-world application2019–2026: reading the market through employment
You will be able to read the actual flow of employment and explain how employment numbers connect to interest rates, the dollar and sectors.
STEP 1What does the jobs report measure?
In Lesson 5, we said that jobs shrink when the economy worsens. So who counts 'jobs,' and how? You need to know how the numbers are made before news articles become readable.
The report the world waits for on the first Friday of every month
The Bureau of Labor Statistics (BLS), part of the US Department of Labor, usually releases the 'Employment Situation' report at 8:30 a.m. US Eastern time on the first Friday of each month. It is commonly called the jobs report. In Korean time that is 9:30 p.m. on Friday (10:30 p.m. when daylight saving time is not in effect), so the Korean market reflects the result on the following Monday morning. If the release date overlaps with a holiday or there are calendar issues, the date shifts slightly, so it is best to check the exact schedule in the calendar.
This report is special because it is the fastest 'monthly report card' for the US economy. The GDP you learned about in Lesson 4 comes out once every three months, and about a month after the quarter ends. The jobs report shows the situation for the month just ended, right after the month closes. And as you learned in Lesson 13, the Fed targets 'maximum employment' alongside inflation, so employment numbers translate directly into interest-rate expectations.
Two surveys, two numbers
The jobs report contains two surveys of different kinds. It is important that the two numbers in the first line of a news story come from different surveys.
Nonfarm payroll gains
It surveys the payrolls of about 120,000 businesses and government agencies and counts how many more or fewer salaried jobs there are than last month. Agricultural jobs, which fluctuate seasonally and are hard to count, are excluded, which is why it is called .
Unemployment rate
It directly surveys about 60,000 households and asks, person by person, whether they are working or looking for a job. This produces the and the .
An easy analogy · The attendance book and the home visit
If you want to know how many students attend a school, one way is to collect the attendance book from each classroom and count (the establishment survey), and another is to visit homes in the neighborhood and ask 'Does the child in this house go to school?' (the household survey). The attendance book counts a student twice if they attend two cram schools, while home visits count each person once. That is why the two numbers sometimes move differently. Neither is wrong; they just look from different angles.
The unemployment rate is a share of 'people looking for work'
The unemployment rate is not the share of the whole population that is not working. The denominator is the labor force: people who are willing and able to work and who are either working or looking for a job. Students, retirees, and people who have given up looking for a job altogether drop out of the denominator.
Unemployment rate in a population of 100 people aged 16+ (hypothetical example)
Unemployment rate = 3 ÷ (60 + 3) = about 4.8%, labor force participation rate = 63 ÷ 100 = 63%. These are hypothetical numbers to aid understanding.
There is a catch here. If 1 of the 3 unemployed people gives up looking for a job, that person becomes not part of the labor force rather than unemployed. The unemployment rate falls to 2 ÷ 62, or about 3.2%. Not a single job was added, yet the unemployment rate looks better. That is why the unemployment rate must be read together with the labor force participation rate.
Common misconceptions
- 'If the unemployment rate falls, jobs have increased?'
- Not necessarily. The unemployment rate also falls when more people give up looking for work. You need to check nonfarm payroll gains and the labor force participation rate together.
- 'Nonfarm payroll gains is the number of working 'people' that increased?'
- The establishment survey counts 'jobs.' If one person works at two places, it counts as two. The household survey is the one that counts people.
Quick checkA country has 95 employed people, 5 unemployed people and 50 people not in the labor force. What is the unemployment rate?
STEP 2The three numbers and revisions
In STEP 1, you learned where the numbers come from. Now let's read the three numbers to watch on release day as one bundle, and sort out how far to trust the first-reported figures.
The jobs report is read through three numbers: how much it grew, how much slack remains, and how much pay rose
Job gains show the strength of the economy, the unemployment rate shows the empty slots in the labor market, and show the wage pressure that can spill over into inflation. Looking at just one number gives you only half an interpretation.
The first number: how many jobs were added
Nonfarm payroll gains are 'how many more jobs there are than last month.' The bigger the number, the more actively companies are hiring. However, the standard for 'how much is good' is not fixed. When population and immigration grow, the number of people who want to work grows too, so a certain number of new jobs is needed each month just to keep the unemployment rate unchanged. This baseline varies a lot by period depending on immigration flows and other factors, so when you look at a single number, it is good to look at it together with the average of the last few months and the market forecast.
The second number: how many people are still looking for work
The unemployment rate is the 'empty slots' left in the labor market. When the unemployment rate is very low, companies struggle to find workers and have to raise pay, and when the unemployment rate rises quickly, it is a signal that the economy is cooling. As you learned in Lesson 6, the unemployment rate is a lagging indicator, so it only starts rising well after the economy turns down. That is why people pay special attention to the moment when the unemployment rate starts to rise noticeably from its low.
The third number: how much pay has risen
The growth rate of average hourly earnings is the bridge between employment and inflation. In Lesson 9, you learned that companies pass higher costs on to prices. In labor-intensive service industries, wages are the biggest cost, so when wages rise quickly, service inflation is also slow to come down. In fact, the YoY growth in US average hourly earnings rose to 5.9% in March 2022 and came down to 3.0% in September 2026 (calculated from BLS and FRED revised data).
See it in a chart: reading one jobs report
Move the three numbers. The verdict below combines the three numbers to gauge the 'temperature' of the labor market and shows the reactions that tend to appear on the day. The actual market varies with the forecast, which you will learn in the next lesson.
Jobs report reading simulator
Figures on the case buttons: January 2023 data 517 thousand jobs · 3.4% · 4.4% (BLS release 2023-02-03, Reuters), July 2024 data 114 thousand · 4.3% · 3.6% (BLS release 2024-08-02, CNN and NYT), September 2026 data 29 thousand · 4.2% · 3.0% (BLS release 2026-10-02, FRED). The verdicts and arrows are simplified for education, and actual reactions vary with the forecast and other news that day.
Press 'January 2023 data.' Jobs grew by 517,000 and the unemployment rate was 3.4%, the lowest since 1969. That is good news for the economy, but the market took it as 'the Fed will raise rates even more.' Conversely, 'July 2024 data' showed slowing job growth and the unemployment rate rising to 4.3%, which raised worries that 'the economy might be cooling too fast.'
First-reported numbers are not final
Nonfarm payrolls are twice over the next two months after first being reported, to reflect late-arriving responses, and once a year are adjusted substantially based on unemployment insurance data (the benchmark revision). So the number that moved the market on release day can differ quite a bit from the number finally confirmed later.
| Reference month | First release | Current revised figure |
|---|---|---|
| January 2023 | +517,000 | about +434,000 |
| July 2024 | +114,000 | about +53,000 |
| May 2026 | +172,000 | about +63,000 |
First release: press coverage of each month's BLS release (Reuters and CNBC 2023-02-03, CNN 2024-08-02, Investopedia 2026-06-05). Current revised figure: month-over-month change calculated directly from FRED PAYEMS (reflecting the release of 2026-10-02).
That is why seasoned investors look not only at this month's number but also at whether the previous two months were revised up or down. Even if this month looks fine, if the previous two months were revised down a lot, the labor market is weaker than it seems.
Common misconceptions
- 'If employment is strong, it is unconditionally good for stocks?'
- No. When inflation is above target and employment is too strong, rate-hike worries grow and the 'multiple' knob from Lesson 1 turns down. February 3, 2023 was such a day.
- 'You can judge the trend from one month's number?'
- A single month's number is shaken by weather, strikes and revisions. The safe habit is to look at the three-month average and the direction of the unemployment rate together.
Quick checkThis month's job gains were a decent 150,000. But the previous two months were revised down to under 120,000 combined. How should you read the labor market?
STEP 32019–2026: reading the market through employment
You have covered the three numbers and revisions. Now let's follow how employment shook the economy and the market over a real stretch of more than seven years.
US job gains and the unemployment rate
The bars are jobs added or lost each month, and the line is the unemployment rate. Change the period with the buttons, and tap a bar to see that month's numbers.
US nonfarm payroll month-over-month change and unemployment rate
Tap a bar.
Sources: US Bureau of Labor Statistics (BLS), FRED PAYEMS (nonfarm payrolls, seasonally adjusted) and UNRATE (unemployment rate). Based on current revised figures through the 2026-10-02 release; changes were calculated directly. The unemployment rate for October 2025 is blank because FRED has no value for it. In the full view, bars that exceed the axis, such as March–June 2020, are cut off at the end and labeled with their numbers.
The shock of spring 2020 is visible at a glance. Because of COVID lockdowns, about 21.87 million jobs disappeared in two months from February to April 2020, and the unemployment rate jumped from 3.5% to 14.8%. All the lost jobs were not recovered until June 2022. During this recovery, jobs grew by about 610,000 a month on average in 2021 and about 380,000 in 2022. With jobs plentiful, wages rose quickly, which led to the high service inflation you saw in Lesson 8 and the fast rate hikes in Lesson 13.
After that, the trend gradually cooled. Average monthly job gains fell to about 210,000 in 2023, about 120,000 in 2024 and about 10,000 in 2025, with several months showing declines. The unemployment rate rose from a low of 3.4% in April 2023 to 4.5% in November 2025. Job growth picked up somewhat in 2026, but the September 2026 data showed only 29,000 jobs added, with the unemployment rate at 4.2%.
Same employment, different reactions: two Fridays
Employment too strong → rate worries
January jobs grew by 517,000, nearly three times the forecast (about 187,000). On the thought that the Fed could raise rates further, the 2-year Treasury yield jumped about 0.21 percentage points in a day, and US stocks closed lower.
Employment too weak → recession worries
July jobs grew by 114,000, below the forecast (about 175,000), and the unemployment rate rose to 4.3%. As recession worries grew, the S&P 500 fell 1.8% and the Nasdaq fell 2.4%.
Sources: CNBC, Reuters, MarketWatch (2023-02-03); CNN, NYT, WSJ (2024-08-02). Forecasts are the market forecasts cited in each report.
Stocks fell when employment was strong and fell when it was weak. The difference was what the market was more worried about at the time. In early 2023, inflation was high at around 6%, so 'interest rates' were the worry, and in summer 2024, inflation had come down to around 3%, so the 'economy' was the worry. The same employment numbers shook different knobs depending on the situation. This story is covered in more depth in Lesson 21, 'When bad news becomes good news.'
For stocks, it goes like this
Let's sum up with the two knobs from Lesson 1. Employment moves the earnings knob through income and spending to company revenue, and it also moves the multiple knob through the Fed's rate decisions.
| Jobs report result | What moves first | Typical reaction |
|---|---|---|
| Strong employment + fast wage growth (when inflation is high) | Multiple | Worries about rate hikes (or delayed cuts) tend to push market rates and the dollar up and weaken growth stocks and long-term bonds. |
| Employment slowing moderately + stable wages | Multiple | The interest-rate burden eases, which is often favorable for growth stocks. |
| Employment plunging + unemployment rate rising fast | Earnings | Worries about consumption and company earnings grow. Cyclical sectors are weak, and defensive sectors such as consumer staples and healthcare tend to hold up relatively well. |
For Korean investors there is one more step. If strong US employment pushes US rates and the dollar up, USD/KRW tends to rise, which also affects foreign investor fund flows. This connection continues in the exchange rate lessons of Part 5. You can find the date of the next jobs report in the Earnings & Economic Indicators calendar, and which sectors employment favors by pressing 'Jobs surprise' in the Macro Map's cause-and-effect chain.
It does not always move that way. If big news such as an inflation reading or company earnings lands on the same day, the impact of the jobs report can be buried. Please read employment together with 'what the market is worried about right now.'
Quick checkA jobs report came out at a time when inflation had already come down near the target. Jobs turned negative and the unemployment rate jumped by 0.3 percentage points. Which knob will the market worry about first?
✓What we learned today
- The US jobs report is usually released by the Bureau of Labor Statistics (BLS) on the first Friday of every month. It covers the employment situation of the previous month.
- Nonfarm payroll gains come from the establishment survey, and the unemployment rate comes from the household survey. The two numbers come from different surveys, so they sometimes diverge.
- Unemployment rate = unemployed ÷ labor force. People who have given up looking for a job drop out of the denominator, so you must look at the labor force participation rate together.
- The first-reported number is not final. January 2023 employment was first reported at 517,000 but is now about 434,000 on the current revised figure.
- When employment is too strong, rate-hike (or delayed-cut) worries grow, and when it is too weak, recession worries grow. Employment shakes both knobs from Lesson 1.
There is something more important than the employment number itself. The next lesson covers why the market reacts to the 'gap versus expectations' rather than to the number, and how to read a surprise.
Quiz5-question quiz
Pick an answer and it's graded right away with an explanation.
Q1. When is the US jobs report usually released?
The Bureau of Labor Statistics (BLS) usually releases it at 8:30 a.m. US Eastern time on the first Friday of every month. In Korea that is Friday night, so it is reflected in the market on Monday.
Q2. Which statement about nonfarm payroll gains and the unemployment rate is correct?
The number of jobs comes from the establishment survey, which counts business payrolls, and the unemployment rate comes from the household survey, which directly surveys households. That is why the two numbers sometimes diverge.
Q3. There are 90 employed people, 10 unemployed people and 50 people not in the labor force. 4 of the unemployed people give up looking for a job. What happens to the unemployment rate?
The 4 who gave up become not part of the labor force. Unemployed 6 ÷ (90 + 6) = about 6.3%. The number of jobs is unchanged yet the unemployment rate looks better, so you need to look at the labor force participation rate together.
Q4. January 2023 employment was first reported at 517,000 but is now about 434,000 on the current revised figure. What is the lesson here?
Numbers are corrected through late-arriving responses and the annual benchmark. Revisions can go up or down, so it is better to look at the trend and the direction of revisions together rather than one month's number.
Q5. At a time when inflation is well above the target, jobs grew far more than expected and wages also rose quickly. What reaction is most likely to appear first?
The Fed looks at inflation and employment together. If inflation is high and employment is also hot, there is a reason to raise rates further. When market rates rise, the multiple knob from Lesson 1 turns down, and growth stocks are especially sensitive.
NextTerms · Next lesson · Related tools
The number of paid jobs excluding agriculture, counted in the establishment survey of the US jobs report. A news line such as 'jobs rose by X thousand' is the month-over-month change in this number.
Unemployment rateUnemployment rateThe share of people who are willing and able to work (the labor force) but cannot find a job. It rises when the economy worsens.
Average hourly earningsAverage hourly earningsThe average hourly pay of private-sector workers, released together with the jobs report. A high growth rate can lead to pressure on service inflation, which affects the interest-rate outlook.
Labor force participation rateLabor force participation rateThe share of the working-age population (16 and older in the US) that is working or looking for a job (the labor force). If more people give up looking for work, this rate falls even when the unemployment rate goes down.
Data revisionData revisionA first-reported economic indicator that is later corrected through late-arriving data or an annual review. US nonfarm payrolls are revised twice over the next two months, and once a year in a big way (the benchmark).
Lagging indicatorLagging indicatorAn indicator that moves later than the economy and confirms the economy that has already passed. Korea's lagging composite index includes the number of employed persons, producer finished goods inventories, the change in service prices, and the CP yield.
ConsensusConsensusThe average forecast of market experts for an economic indicator or company earnings. The gap between the actual release and this figure moves the market.
FedFed, US Federal Reserve SystemThe central bank of the United States. It sets the policy rate with the goals of price stability and maximum employment.
Interest rateInterest rateThe price of borrowing money. When rates rise, the present value of future earnings falls, which tends to lower stock multiples.
RecessionRecessionA state in which economic activity such as output, income and jobs visibly shrinks for a considerable period. It is often described as 'two consecutive quarters of falling real GDP', but the official declaration takes multiple indicators into account.
This is educational material and not investment solicitation. There is no guarantee that past relationships will repeat in the future.