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How to trade NFP day
The headline payrolls number is the noisiest part of the NFP release. The signal is in revisions to prior months, average hourly earnings (wages), and unemployment-rate composition. The reaction chain is similar to CPI - 2Y first, then USD, then equities - but with bigger gaps between the asset reactions because labor data is more cyclical and less rate-direct than inflation data.
- Headline NFP - Noisy month-to-month. Watch the 3M average.
- Revisions - Prior-month revisions often matter more than the new print.
- Wages - AHE growth - Fed's inflation-via-labor channel.
- U-rate composition - Participation rate matters as much as the headline U-rate.
Beyond the headline
- Headline NFP - too noisy to act on alone
- 3-month moving average - better trend signal
- Revisions - last 2 months often revised more than current print
- Average hourly earnings (AHE) - wage growth, Fed-relevant
- Unemployment rate - but check participation
- U-6 - broader underemployment
Reaction chain
- 2Y yield - first to move, usually within 60 seconds
- USD - follows 2Y
- Equity index futures - react to implied Fed path
- Sector rotation - banks, defensives, growth
What usually traps people
Trading the headline beat/miss. NFP is too revised, too noisy, and too multi-dimensional for a one-number reaction. Read all five components in order and let the curve tell you the verdict.