Nonfarm payrolls provide information about the state of employment across the country. The number of jobs added or lost in a given month can indicate the health of the economy and how the Federal Reserve will implement monetary policy. A rise in job openings could indicate that businesses are hiring more people. People with more money in their pockets could spend it on groceries, dining out, vacations, or home renovations. These payroll data points can be fed into other economic indicators such as real wages.

At the same time, a strong job market may indicate that the economy is growing too quickly, which could lead to inflationary pressures—that is, higher wages. Nonfarm payrolls are thus regarded as a leading indicator of the economy.

A strong employment report may prompt Fed officials to consider raising key interest rates to combat inflation. A weak payroll number, on the other hand, may give the central bank pause before acting on monetary policy. However, a string of poor data could lead to a reduction in interest rates in an effort to stimulate the economy.