Without people who work, there would be no economic activity. For this reason, unemployment is an important gauge of the health of a country’s economy and the pace of its economic growth. Increasing unemployment (or decreasing employment, as it is sometimes also referred to as), has a negative effect on a country’s economic growth, while decreasing unemployment (or rising employment) is seen as a positive sign for the economy. Because rising unemployment signals a troubled economy, the market expects the central bank to reduce interest rates in order to increase the supply of money and help boost economic activity and growth. As we saw earlier, the expectation of a rate cut tends to weaken the currency. The converse is true when unemployment is falling – a fast growing economy may soon experience increased inflation because of all

the financial activity taking place, and to prevent inflation from getting out of hand central banks are likely to increase interest rates. As a result of the expected rate hike, the currency is likely to appreciate. As well as unemployment and employment figures, other common labor-related indicators are US Non-Farm Payrolls (NFP), Private Payrolls and Claimant Count, and usually come out on a monthly basis. By far the most important employment indicator is the US NFP, as it tends to have the greatest effect on the forex market. It represents the change in the number of employed people during the previous month (excluding the farming industry), and is released shortly after the month ends, on the first Friday of the following month.