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On the first Friday of every month (or sometimes on the second Friday when the first Friday is the first of the month), the Bureau of Labor Statistics, a division of the U.S. Labor Department, issues the single most closely watched economic report of the month, namely, the employment report. Investors eagerly await this report, which is issued at precisely an hour before the stock market’s open, because it is a key snapshot of the status of the American economy.

Why is this report, which measures not only changes in non-farm payrolls and the rate of unemployment, but also the average workweek and hourly earnings, so important? The reason is simply that much of the nation’s economic activity and its current and likely near-term direction are influenced by this report. Directly affected are levels of consumer spending, from outlays for autos, retail goods (clothing, electronics, durable goods), houses and home furnishings, vacations, education, sporting events, food and drink, and dining out. Essentially, employment data and trends can heavily influence all ranges of consumer activity. Since the consumer typically accounts for about 70% of this nation’s economic output, or its gross domestic product, this report’s importance is clear.

What is in this report? The primary component is the monthly change in non-farm payrolls. This household data survey figure is further broken down into various industry components including numbers of workers in construction, manufacturing, retail trade, temporary help, and the federal government. 

Also included in the report and the second of the most closely watched data points (after non-farm payrolls) is the unemployment rate, which is expressed in tenths of a percentage point. This aggregate figure is then broken down by category, including rates of joblessness for adult men, adult women, whites, blacks, Hispanics, and teenagers. We also get figures for those working part time for economic reasons. This group is often referred to as involuntary part-time workers.

The employment report is often referred to as a lagging indicator, especially the rate of unemployment, as companies initially often ramp up production via use of overtime, rather than new hiring, as the latter is more expensive in that benefits and vacations are often included. That said, the report still gives a reasonable snapshot of where the economy is and what is the near-term prospect.

Finally, it should be understood that this survey is an estimate, covering thousands of households. It is a rare month that the prior two months are not restated—often dramatically—because of new data. Thus, it is often counter productive for the stock market to react too sharply—up or down--to the report’s release on that first Friday of the month. However, markets thrive on new data—even if that data can be misleading and erroneous.