CompThe most important economic indicator by far is the monthly Employment Situation published by the Bureau of Labor Statistics (BLS). No other report has the potential to move the forex market like employment and no other indicator is more revealing of general economic conditions than the labor market data. Employment data is important because it reveals how firms, corporations, and others responsible for hiring decisions view the current and upcoming economic environment.

The monthly employment report is based on two separate surveys: the Current Population Survey (CPS), aka the household survey, and the Current Employment Statistics survey (CES), aka the establishment, or payrolls, survey. Supplemental to each release, the commissioner of the Bureau of Labor Statistics provides a statement to the Joint Economic Committee of the U.S. Congress. The statement, generally three pages long, highlights significant strengths and weaknesses in the monthly employment statistics.

Top billing on the employment report is generally shared by two figures; the unemployment rate and the monthly change in nonfarm payrolls. Average hourly earnings, hours worked, overtime hours worked and the monthly change in manufacturing jobs also command a great deal of traders attention.

In the employment surveys, the BLS includes only persons older than sixteen. Excluded from surveys are people in mental or penal institutions and members of the armed forces. People qualify as employed in two ways. First are those who, during a given period, have worked as paid employees in someone else’s company or in their own businesses or on their own farms or have done fifteen hours or more of unpaid labor in a family-operated enterprise. Second are those with jobs or in businesses from which they have take temporary leave, paid or unpaid, because of illness, bad weather, vacation, child-care problems, labor disputes, maternity or paternity leave or other family or personal obligations.

Unemployed people are those not working during the period in question, whether because they voluntarily terminated their employment, in which case they are classified as job leavers, or because they were involuntarily laid off, making them job losers.

Strong relationships exist between the employment data and virtually every other indicator. The growth rate of non farm payrolls is generally strongly correlated with the growth rate of GDP, industrial production and capacity utilization, consumer confidence, spending, and income.

The Industrial Production and Capacity Utilization report is assembled and released around the fifteenth of each month by the Board of Governors of the Federal Reserve System. It presents the data on the output of the nation’s manufacturing, mining, and utility sectors. Also known as the Federal Reserve’s G17 report, it organizes this data into industrial production and capacity utilization indices. The former measures the physical volume of the output of various industries and markets, the later shows what portion of the nation’s production capacity was involved in creating that output. The Industrial Production and Capacity Utilization release, along with the historical data, is available on the Federal Reserve’s website,

The Industrial Production and Capacity Utilization report is an assemblage of fifteen tables arranged over nineteen or twenty pages. They display the current month’s values for the various industrial-production and capacity-utilization indices, revisions to the previous months’ values, month to month percentage changes in the indices, and their quarterly and annual rates of growth.

The industrial production indices measure quantity of output, not dollar volume, relative to a base year, currently 1997, whose value is set at 100. The Federal Reserve obtains the production data it uses to construct these indices both directly and indirectly. Direct sources include trade associations such as the American Forest and Paper Association, the U.S. Geological Survey, the Internal Revenue Service, and the Tanner’s Council of America. Actual production data, however, is available at different times for different industries. When hard figures aren’t available the Federal Reserve estimates output based on the number of production-worker hours in the Bureau of Labor Statistics’ monthly Employment Situation report or on electric power use by industry.

Capacity utilization is a measure of how close the nation’s manufacturing sector is to running at full capacity. The Fed defines full capacity as sustainable practical capacity, or the greatest level of output that a plant can maintain within the framework of a realistic work schedule, taking into account normal downtime and assuming sufficient availability or inputs to operate the machinery and equipment in place.

The report contains capacity and capacity utilization rates for eighty-five industries, including the following major categories:

• Semiconductors and related electronic components
• Motor vehicles and parts
• Apparel and leather
• Paper
• Chemicals
• Wood products
• Electric utilities