What Do ‘Jobs Numbers’ Mean for You and Your Money?

Financial media organizations regularly report, analyze and discuss “job numbers,” but what does that mean? On a very basic level, jobs numbers, called jobs reports, refer to how many people are unemployed right now, how many people are newly unemployed and so on.

But how are they relevant to your financial situation? Let’s dive deeper.

In this article

    What are jobs numbers?

    When media organizations report or economists talk about “jobs numbers” or the “jobs report,” they’re almost always referring to one specific thing: the most recent Employment Situation Summary issued by the US Bureau of Labor Statistics each month. You can see the full report for the current month on the Bureau of Labor Statistics website, but it’s quite long and detailed.

    Among other things, this Employment Situation Summary estimates the number of people employed and unemployed at the moment and the number of hours they worked. This information is almost always compared to those numbers from the previous month, as well as numbers from a year ago.

    This data is based on a survey of approximately 60,000 households as well as data from approximately 150,000 businesses and government agencies. That information is enough to make pretty accurate estimates as to the employment situation in America, but it’s not perfect. Usually, the jobs numbers are revised a bit later as more accurate data comes in, but the initial report is usually reasonably accurate.

    Why do people care about the jobs reports?

    So, how is this information important?

    In general, an increase in the number of total jobs available is usually a sign that the economy is strengthening, while a decrease in that number can be a sign that the economy is weakening. If there are more people working, after all, that means that more people have money to spend, and that means businesses do well because they have more paying customers. The reverse is true if fewer people are employed.

    Thus, people will often use the jobs report as a basis to make decisions about the future. Investors will use it to decide how to invest. For example, many investors move their investments from currency to currency based on the relative health of the countries involved, making money via exchange rates. If the jobs report looks good, then investors are likely to want to invest in American dollars, and that makes the value of the dollar go up compared to other currencies.

    Businesses, particularly large ones, will sometimes make long-term decisions based on recent economic data. If it appears as though employment is strong and going up, companies may be more willing to invest in projects and products that those consumers might spend their money on. On the other hand, if employment looks weak, they might not want to OK those projects.

    Something worth noting is that if there’s a long series of very good jobs reports, inflation might start increasing. Inflation just means that prices are increasing over time, and rising inflation means that price increases are happening faster than at other times.

    Inflation happens because there’s a surge in demand for products. When lots of people are employed and making money, they’re wanting to spend it, and that’s where the surge in demand comes from. To keep inflation low, the Federal Reserve will raise their interest rates (which affects interest rates on everything, from bank accounts to car loans and mortgages) so that people and businesses stop spending quite so fast and invest and save it a little more. It’s a big balancing act!

    Jobs numbers and their impact on you

    So, what does this all mean for the average American? If you’re not making big investment choices and you’re not making big business decisions based on this kind of information, do the job numbers matter?

    Here are two big ways in which those numbers might impact you, and why you should care.

    Big financial moves

    In general, if there’s a string of improving jobs reports, that means your own job is relatively more secure than when there’s a string of worsening jobs reports.

    This means that if you’re on the fence about making a major financial move, like buying a house, a few recent jobs reports with positive numbers is a factor in favor of making that move. This shouldn’t be the only factor in a decision like this, but it can be a factor.

    On the other hand, if jobs numbers are steadily getting worse, you might want to consider holding off on a major financial move. Keep driving that car for a while longer instead of upgrading it to a newer model. Again, the jobs report should be one factor in this among many, most of which relate to your own personal situation.

    For example, if you’re thinking of buying a home, a declining jobs report might be a small tick in the direction of buying a smaller home or simply choosing to rent instead of buying.

    Investment decisions

    Often, good jobs numbers mean that the stock market will immediately respond in a positive way, and that might be a temptation to shift your investments around. Unless you’re a highly involved investor, that’s probably not a wise move, as the jobs report is usually priced into the market by the time you hear about it.

    Instead, stick to your investment plan, and know that the jobs numbers do have an impact on the value of your investment, particularly on the day the report is released, but it’s not something that’s really actionable. Remember, investing is part science and part emotion – and with the emotion, it’s mostly about keeping it in check.

    Finding trusted information about the jobs numbers

    The full jobs report directly from the Department of Labor Statistics is the most impartial way to see the jobs numbers, but it’s a long report written in technical language. Where can a person go to learn more about the current jobs numbers in an unbiased way?

    The best approach is to read about it from several different reputable sources. When the jobs report is released, see what’s being said at Bloomberg, Barron’s, the Wall Street Journal, and The New York Times to give you a variety of perspectives. Every story has more than one side to it, so if you’re wanting the big picture, you shouldn’t trust just one source (or even multiple sources that all say mostly the same thing). Dig deeper.

    However, in terms of day-to-day impact on your life, you don’t need to pay a lot of attention unless you’re facing a major financial decision in the near future, at which point a bit of economic information can help!

    We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

    Trent Hamm

    Founder & Columnist

    Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.