Understanding the Difference Between ADP Non-Farm Employment Change and Non-Farm Payrolls (NFP)
For forex and commodity traders, two frequently highlighted US employment data are the ADP Non-Farm Employment Change and the Non-Farm Payrolls (NFP). Both are often major market movers, especially for the USD, gold, and bonds. However, although both focus on employment, there are fundamental differences between the two.
What is ADP Non-Farm Employment Change?
The ADP Non-Farm Employment Change is released by the private company Automatic Data Processing (ADP). This report measures changes in the number of employees in the private sector, excluding agriculture, government, households, and non-profit organizations.
This data is typically released every Wednesday, two days before the official NFP release, so it is often referred to as a "warm-up" for market participants. Its impact on the market is quite significant, although not as significant as the NFP.
What is Non-Farm Payrolls (NFP)?
The Non-Farm Payrolls (NFP) is the official employment report published by the Bureau of Labor Statistics (BLS) of the US Department of Labor every first Friday of the month.
This data includes the number of new jobs outside the agricultural sector, including both the private and government sectors. In addition, the NFP report also presents the unemployment rate and average hourly wage growth.
Because it is more official and comprehensive, the NFP has a much greater influence on global market movements. The Federal Reserve also uses this data as a primary reference in determining the direction of monetary policy, including interest rates.
Market Impact
ADP Non-Farm Payrolls: Often provides an early glimpse into labor market conditions, but does not always align with the NFP results. If the results differ significantly, the market can experience volatility before stabilizing.
NFP: Is a major driver of market volatility. Better-than-expected data typically strengthens the US dollar and puts pressure on gold. Conversely, poor data tends to weaken the dollar and boost gold and silver prices.
For traders, the ADP Non-Farm Payrolls can be used as an early predictor, while the NFP is the official data that determines the overall direction of the market. Understanding the difference between the two is crucial for more measured trading strategies and avoiding the trap of misleading volatility.
Source: Newsmaker.id
