Understanding Nonfarm Payroll: What Every Business Owner Needs to Know

Every first Friday of the month, financial markets hold their breath. Traders pause, economists refresh their screens, and news anchors prepare for breaking updates. The reason? The nonfarm payroll report—arguably the most closely watched economic indicator in the United States.

But this monthly ritual isn't just for Wall Street. The nonfarm payroll report contains valuable insights for small business owners trying to understand economic conditions, plan hiring strategies, and anticipate changes in consumer spending. Understanding what this report measures and how to interpret it can give you a meaningful edge in business planning.

What Is Nonfarm Payroll?

Nonfarm payroll (NFP) measures the total number of paid workers in the United States, excluding four specific categories: farm workers, private household employees, non-profit organization employees, and active military personnel. Despite these exclusions, nonfarm payroll captures approximately 80% of the workers who contribute to the U.S. gross domestic product.

The Bureau of Labor Statistics (BLS) publishes the Employment Situation report—which includes nonfarm payroll data—on the first Friday of each month at 8:30 AM Eastern Time. The report reflects employment conditions from the previous month, making it one of the most timely economic indicators available.

Why Are Farms Excluded?

The name might seem arbitrary, but there's a practical reason for excluding agricultural workers. Farm employment experiences dramatic seasonal fluctuations—harvest seasons require temporary labor spikes, while winter months see significant declines. Including farm workers would create misleading volatility in the overall employment picture.

By focusing on non-agricultural employment, the report provides a clearer view of structural economic trends rather than seasonal agricultural cycles.

How the Data Is Collected

The nonfarm payroll figures come from two separate surveys conducted by the BLS:

The Establishment Survey

This survey collects data from approximately 122,000 businesses covering about 666,000 individual worksites. Together, these represent roughly one-third of all nonfarm workers in the country. About 40% of the sample consists of businesses with fewer than 20 employees, ensuring small business employment is well-represented.

The establishment survey provides the headline payroll number—how many jobs were added or lost during the month.

The Household Survey

This companion survey interviews approximately 60,000 households and produces the unemployment rate. While the establishment survey counts jobs, the household survey counts people, making it possible to capture those who are unemployed and actively seeking work.

Both surveys are conducted around the 12th of each month through a combination of mail, email, phone calls, and in-person visits by trained BLS economists.

What the Report Measures

The monthly Employment Situation report contains far more than just the headline jobs number. Key metrics include:

Total Nonfarm Payroll Change

The most-watched figure: how many jobs the economy added or lost compared to the previous month. Positive numbers indicate job growth; negative numbers signal job losses.

Unemployment Rate

The percentage of the labor force that is jobless and actively seeking employment. This figure comes from the household survey and represents people aged 16 and older.

Labor Force Participation Rate

The percentage of the working-age population either employed or actively looking for work. A declining participation rate can mask true unemployment levels.

Average Hourly Earnings

Changes in wages provide insight into inflationary pressures and worker bargaining power. Rising wages can signal a tight labor market.

Average Weekly Hours

How many hours the typical employee works per week. Changes here often precede hiring decisions—businesses typically adjust hours before adding or cutting staff.

Industry Breakdown

Employment changes by sector, showing which industries are growing and which are contracting. This breakdown helps identify economic trends affecting specific parts of the economy.

Why Nonfarm Payroll Matters to Business Owners

The NFP report isn't just for economists and traders. Here's why it should be on every business owner's radar:

Understanding Consumer Spending Power

When employment rises, more people have income to spend. The December 2025 report showed total nonfarm employment at 159.5 million workers. Each of those employed individuals represents potential customers with disposable income.

Conversely, rising unemployment signals potential softening in consumer demand. If your business depends on discretionary spending, employment trends provide early warning of changing conditions.

Anticipating Interest Rate Changes

The Federal Reserve monitors employment data closely when making monetary policy decisions. Strong job growth can lead to interest rate increases as the Fed tries to prevent the economy from overheating. Weak employment data might prompt rate cuts to stimulate growth.

For business owners, this connection between employment and interest rates affects:

• Business loan rates
• Commercial real estate financing
• Credit card processing costs
• Equipment financing terms

Understanding employment trends helps you anticipate changes in borrowing costs.

Gauging Hiring Conditions

The unemployment rate directly affects your ability to recruit talent. When unemployment drops below 5%, businesses typically face more competition for workers, often leading to higher wages and signing bonuses.

The December 2025 unemployment rate of 4.4% indicates a relatively tight labor market. In this environment, businesses may need to:

• Offer competitive compensation packages
• Invest more in employee retention
• Consider training programs for less-experienced candidates
• Adjust timeline expectations for filling positions

Identifying Industry Trends

The sector breakdown in the NFP report reveals which industries are expanding and which are contracting. In 2025, healthcare and social assistance led job creation, adding 713,000 positions. Meanwhile, goods-producing sectors faced pressure, with manufacturing losing jobs throughout the year.

These trends help business owners understand:

• Where to find growth opportunities
• Which supplier industries might face capacity constraints
• Where customer industries might be experiencing stress
• How broader economic shifts affect their specific sector

How to Interpret the Numbers

Raw payroll numbers require context to be meaningful. Here's how to read the report effectively:

Compare to Expectations

Markets and businesses react based on how actual numbers compare to forecasts. A 100,000-job gain might be good news if expectations were for 50,000, but disappointing if analysts predicted 150,000.

Major financial news sources publish consensus estimates before each report, giving you a benchmark for interpretation.

Look at Revisions

The BLS revises previous months' data as more survey responses arrive. Sometimes these revisions are substantial. Always check whether the past two months were revised upward (the economy was stronger than initially reported) or downward (conditions were weaker).

Understand Seasonal Adjustments

The BLS applies seasonal adjustments to account for predictable employment patterns—holiday retail hiring, summer construction peaks, and school-year fluctuations in education employment. These adjustments make it easier to identify genuine economic changes rather than normal calendar-driven variations.

Watch the Trend, Not Just the Month

Single monthly readings can be volatile. A three-month moving average smooths out statistical noise and provides a clearer picture of employment momentum.

Examine Sector Details

The headline number can mask important divergences. A modest overall gain might include strong growth in some sectors offset by weakness in others. Understanding which sectors are driving changes helps you assess relevance to your business.

2025 Employment Trends: What the Data Showed

Looking at 2025 employment data provides useful context for understanding current conditions:

Overall Slowdown

Payroll employment grew by 584,000 jobs in 2025—an average of 49,000 per month. This marked a significant deceleration from 2024, which added 2 million jobs (168,000 per month). The slowing pace reflects a maturing economic expansion and tighter labor market conditions.

Services Lead, Goods Lag

Service-providing industries continued to drive employment growth, while goods-producing sectors (manufacturing, construction, mining) faced headwinds. This pattern reflects long-term structural shifts in the U.S. economy toward services.

Healthcare Dominates

Healthcare and social assistance added more jobs than any other sector—713,000 positions in 2025 alone. Demographics, including an aging population and expanded healthcare access, continue to fuel demand in this sector.

Retail and Manufacturing Weakness

Retail trade and manufacturing both shed jobs, reflecting challenges from e-commerce disruption and global supply chain adjustments. Businesses in these sectors faced hiring freezes or layoffs even as the broader economy added jobs.

Using NFP Data for Business Planning

Here's how to incorporate employment data into your business decisions:

Timing Major Decisions

If you're planning significant investments, expansions, or hiring initiatives, track employment trends for context. Strong and accelerating job growth suggests favorable conditions for expansion. Weakening employment trends might warrant more conservative timing.

Adjusting Compensation Strategy

When the labor market tightens (low unemployment, strong job growth), competitive pressure on wages increases. Budget accordingly. In looser markets, you may have more leverage in negotiations.

Forecasting Revenue

For businesses whose revenue correlates with employment levels—staffing firms, commercial real estate, business services—NFP data provides a leading indicator of demand trends.

Scenario Planning

Monthly employment reports help you update assumptions in your business forecasts. If you've built projections assuming steady economic growth, weakening employment data might trigger a review of more conservative scenarios.

Where to Find the Data

Several resources provide access to nonfarm payroll data:

• Bureau of Labor Statistics (bls.gov): The official source for the Employment Situation report
• Federal Reserve Economic Data (FRED): Historical data and visualization tools
• Financial news outlets: Real-time coverage and analysis on report days

The BLS website offers detailed tables breaking down employment by industry, hours, and earnings, providing far more granularity than headline summaries.

Track Your Business Performance Alongside Economic Trends

Understanding macroeconomic indicators like nonfarm payroll helps you put your own business performance in context. When employment grows but your revenue stalls, you know the problem is company-specific. When your sales decline alongside weakening employment, broader economic factors likely share responsibility.

Maintaining clear financial records makes it possible to correlate your business results with economic trends. Beancount.io provides plain-text accounting that gives you complete transparency over your financial data—making it easy to track performance, spot patterns, and connect your results to the economic environment. Get started for free and build the financial clarity your business needs.