“The Employment Situation Report,” also known as the Labor Report, is an extremely broad-based indicator released by the Bureau of Labor Statistics (BLS). It is made up two separate and equally important surveys. The first, the "establishment survey," is a sampling of more than 400,000 businesses across the country. It is the most comprehensive labor report available, covering about one-third of all non-farm workers nationwide, and presents final statistics including non-farm payrolls, hours worked and hourly earnings. The data sample is both large and deep, with breakouts covering more than 500 industries and hundreds of metropolitan areas.
The second survey, referred to as the "household survey," measures results from more than 60,000 households and produces a figure representing the total number of individuals out of work, and from that the national unemployment rate. The data is compiled by the U.S. Census Bureau with assistance from the Bureau of Labor Statistics. This carries a census-like component, bringing demographic shifts into the mix, which gives the results a different perspective.
Both sets of survey results will show the change from the previous month, and also year-over-year, as trendlines are very important with this often-volatile statistic.
Importance of the Labor Report to investors
This report is highly important to investors and can move the markets. The information is timely regarding both wage and job growth. Many analysts consider this the best single measure of the health of the economy. The tone of this report often sets the tone of other economic reports released during the month. But there is so much information provided that it's important to identify the numbers that will be most watched.
The non-farm payrolls figure is very important on Wall Street; it's the benchmark labor statistic used to determine the health of the job market because of its large sample size and historical significance of accurately predicting business cycles.
The payroll figures from the establishment report are considered a coincident indicator.
Strengths of the Labor Report:
- As one of the most widely watched reports, the “Employment Situation Report” gets a lot of press and can move the markets
- Relates to investors on a personal level; everyone understands having a job or looking for work
- Service industries are covered here—it is hard to find good indicator coverage of service-based businesses
Weaknesses of the Labor Report:
- Summer and other seasonal employment tends to skew the results
- Only measures whether people are working; it does not take into account whether these are jobs the people wish to have, or whether they are well-suited to workers' skills
- Volatile; revisions can be quite large, and updates should always be viewed in the most recent report
- Unemployment and payroll figures can seem to be out of alignment, as they are derived from two different surveys
- The compensation cost portion is considered inferior to the Employment Cost Index
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