Master the markets by understanding what truly drives price action. This comprehensive guide will transform how you analyze economic data and make trading decisions. 

Employment Data Indicators

The employment sector serves as the foundation of economic health. These key indicators provide the earliest signals of economic expansion or contraction, making them essential for any serious trader. 

1. Non-Farm Payroll (NFP) 

Definition: A critical monthly measurement of employment change, excluding the agricultural sector. 

How to analyze effectively: 

Check the US Quit Rate at Trading Economics  

• Rising rates indicate workers are voluntarily leaving jobs (positive economic confidence) 

• Falling rates suggest workers are staying put (potential economic uncertainty) 

Review US Challenger Job Cuts at Trading Economics  

• Increasing numbers indicate higher layoffs (negative economic signal) 

• Decreasing numbers suggest lower layoffs (positive economic signal) 

Examine JOLTS Job Openings data  

• Rising numbers indicate more available jobs (economic expansion) 

• Falling numbers suggest fewer job opportunities (potential contraction) 

Analyze ISM Manufacturing & Services PMI  

• Check the employment component specifically 

• Rising employment figures from previous periods often predict rising NFP 

2. ADP Non-Farm Payroll 

Definition: An estimate of employment changes for the previous month, excluding agricultural and government sectors. 

Key insight: Released before official NFP data, serves as a preliminary indicator but doesn't always align perfectly with NFP results. 

3. JOLTS Job Openings 

Definition: The number of job vacancies during a specific period, excluding farming industries. 

How to analyze strategy: 

• Wait for complete data before drawing conclusions 

• Use related commentary on Forex Factory for additional context 

4. Unemployment Claims 

Definition: The number of individuals filing for unemployment insurance for the first time during the previous week. 

How to analyze effectively: 

• Check Bureau of Labor Statistics for historical data 

• Rising claims often follow rising quit rates 

• Data typically aligns with ISM reports and NFP findings 

• Forex Factory related stories provide valuable context 

5. Average Hourly Earnings 

Definition: Shows wage changes paid to workers, excluding the agricultural sector. 

Key influences: 

• Heavily influenced by ISM business sector data 

• Check Bureau of Labor Statistics and Bureau of Economic Analysis for comprehensive data 

6. Unemployment Rate 

Definition: The percentage of the total workforce that is unemployed and actively seeking employment. 

Analysis tip: If job openings increase but unemployment remains unchanged, it may indicate a skills mismatch in the labor market. 

Consumer Spending Data 

Consumer activity accounts for roughly 70% of most developed economies. Understanding these spending patterns reveals the true strength of economic momentum and provides crucial insights into future business performance and monetary policy decisions. 

1. Consumer Price Index (CPI) 

Definition: Measures price changes in consumer goods and services, serving as a key inflation indicator. 

For comprehensive analysis, check: 

• Latest employment data 

• Previous CB Consumer data 

• Previous PCE data 

• Previous durable goods data 

• Previous housing sales data 

• Oil price trends 

• Bureau of Labor Statistics 

2. Core Consumer Price Index (Core CPI) 

Definition: Measures consumer price changes excluding food and energy (which tend to be volatile). 

Key correlation: Check previous retail sales data for context 

3. Retail Sales 

Definition: Measures changes in the total value of retail sales, indicating consumer spending behavior. 

Key insight: Strong labor markets typically lead to strong retail sales 

4. Core Retail Sales 

Definition: Total retail sales excluding automobile sales, which can be volatile. 

5. Building Permits 

Definition: Measures changes in the number of new building permits issued, a leading indicator of housing market demand. 

6. New Home Sales 

Definition: The annual rate of single-family homes sold during the previous month. 

Analysis tip: If New Home Sales data is released before Existing Home Sales and exceeds expectations, Existing Home Sales may decline. 

Check these factors: 

• Interest rates 

• Employment data 

• Existing home sales 

7. Existing Home Sales 

Definition: The annual rate of residential buildings sold during the previous month, excluding new construction. 

Check these factors: 

• Interest rates 

• Employment data 

• New home sales 

8. Pending Home Sales 

Definition: Change in the number of homes under contract but awaiting closing, excluding new construction. 

Production & Business Data

Business activity reflects how companies respond to consumer demand and economic conditions. These indicators reveal whether businesses are expanding or contracting, providing valuable insight into employment prospects, future inflation, and overall economic trajectory. 

1. ISM Manufacturing PMI 

Definition: A diffusion index based on surveyed purchasing managers in the manufacturing industry. 

How to interpret: Values near or above 50.0 indicate sector expansion; values below indicate contraction. 

Key connections: 

• Previous employment data 

• Forex Factory related stories 

• Consumer spending data 

2. ISM Services PMI 

Definition: A diffusion index based on surveyed purchasing managers in the service industry. 

How to interpret: Values near or above 50.0 indicate sector expansion; values below indicate contraction. 

3. Empire State Manufacturing Index 

Definition: A diffusion index based on surveyed purchasing managers in New York's manufacturing industry. 

How to interpret: Values near or above 0 indicate sector improvement. 

Key connections: 

• ISM Manufacturing & Non-Manufacturing data 

• Employment data 

• Consumer spending data 

4. Producer Price Index (PPI) 

Definition: Measures price changes in finished goods and services sold by producers, a leading indicator of consumer inflation. 

Key insight: When producers charge higher prices, these increased costs are typically passed on to consumers. 

Monetary Policy Data 

Central banks act as the economic thermostat, adjusting policy to either cool down overheating economies or stimulate sluggish growth. Understanding these policy decisions and communications provides traders with powerful insights into future market movements and currency valuations. 

1. Federal Open Market Committee (FOMC) Meeting Minutes 

Definition: Detailed notes from the most recent FOMC meeting, offering insights into economic and financial conditions influencing interest rate decisions. 

For effective analysis: 

• Check latest FED news 

• Review Powell's recent speeches 

2. FED Fund Rate 

Definition: Interest rate announcements based on current economic conditions, used to manage inflation. 

Key correlation: Check SOFR (Secured Overnight Financing Rate) on Global Rates 

3. FED Chair Powell Speeches 

Key insight: As central bank head controlling short-term interest rates, Powell has significant influence on currency valuation. Traders watch his public engagements for subtle hints about future monetary policy. 

4. Jackson Hole Symposium 

Definition: A meeting held in Jackson Hole attended by central bank governors, finance ministers, academics, and financial market participants from around the world. 

Trading impact: Comments and speeches from central bank governors and influential officials can create significant market volatility. 

Macro Economic Cycle Sequence

Economic cycles follow predictable patterns that repeat throughout history. By understanding the sequence and interconnections between different sectors, traders can anticipate market movements before they occur, positioning themselves ahead of the crowd. 

Employment Sector (Good or Bad) 

• A nation's economic condition begins with employment sector health 

Consumption Sector (Good or Bad) 

• Strong employment naturally leads to strong consumption 

• Weak employment leads to weak consumption 

Business Sector (Good or Bad) 

• Strong consumption drives business growth 

• Weak consumption results in business contraction 

National Revenue 

• When all business sectors function well, national revenue rises 

• When business sectors struggle, national revenue falls 

Monetary Policy 

• If economic conditions cause inflation due to excess money circulation, central banks raise interest rates to control money supply and protect currency value 

• If economic activity weakens, central banks lower interest rates to increase money circulation and stimulate economic growth