The employment rate is an economic indicator with significance in multiple areas. The rate of
employment, naturally, measures the soundness of an economy (See Figure 3.1). The unemployment rate
is a lagging economic indicator. It is an important feature to remember, especially in times of economic recession. Whereas people focus on the health and recovery of the job sector, employment is the last
economic indicator to rebound. When economic contraction causes jobs to be cut, it takes time to generate psychological confidence in economic recovery at the managerial level before new positions are added.
At individual levels, the improvement of the job outlook may be clouded when new positions are added in small companies and thus not fully reflected in the data. The employment reports are significant to the financial markets in general and to foreign exchange in particular. In foreign exchange, the data is truly affective in periods of economic transition—recovery and contraction. The reason for the indicators'
importance in extreme economic situations lies in the picture they paint of the health of the economy and in the degree of maturity of a business cycle. A decreasing unemployment figure signals a maturing cycle, whereas the opposite is true for an increasing unemployment indicator.
Figure 3.1. Diagram of the U.S. unemployment rate.
Consumer spending indicators. Retail sales are a significant consumer-spending indicator for foreign exchange traders, as it shows the strength of consumer demand as well as consumer confidence.
component in the calculation of other economic indicators, such as GNP and GDP.
Generally, the most commonly used employment figure is not the monthly unemployment rate,
which is released as a percentage, but the nonfarm payroll rate. The rate figure is calculated as the ratio of the difference between the total labor force and the employed labor force, divided by the total labor force. The data is more complex, though, and it generates more information. In Forex, the standard indicators monitored by traders are the unemployment rate, manufacturing payrolls, nonfarm payrolls,
average earnings, and average workweek. Generally, the most significant employment data are
manufacturing and nonfarm payrolls, followed by the unemployment rate.
Employment Cost Index ( ECI). The Employment Cost Index measures wages and inflation and provides a comprehensive analysis of worker compensation, including wages, salaries and fringe
benefits.
Consumer Spending Indicators grounded on data due to the retail sale volume is important for
the Forex because it shows the level of consumers demand and their sentiments, which is initial data
for the calculation of other indicators as Gross National and Gross Domestic Products.
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Retail Sails. Retail sales are a significant consumer-spending indicator for foreign exchange traders, as it shows the strength of consumer demand as well as consumer confidence. As an economic
indicator, retail sales are particularly important in the United States. Unlike other countries such as Japan, the focus in the U.S. economy is the consumer. If the consumer has enough discretionary income, or enough credit for that matter, then more merchandise will be produced or imported. Retail sales figures create an economic process of "trickling up" to the manufacturing sector.
The seasonal aspect is important for this economic indicator. The retail sales months that are most
watched by foreign exchange traders are December, because of the holiday season, and September, the
back-to-school month. Increasingly, November is becoming an important month, as a result of the shift in the former after-Christmas sales to pre-December sales days. Another interesting phenomenon occurred
in the United States. Despite the economic recession in the early 1990s, the volume of retail sales was unusually high. The profit margin, however, was much thinner. The reason is the consumer's shift toward discount stores.
Traders watch retail sales closely to gauge the overall strength of the economy and, consequently,
the strength of the currency. This indicator is released on a monthly basis.
Consumer sentiment . It’s a survey of households that is designed to gauge direct the individual propensity for spending money to increase or to maintain on the same level their expenditures
connected with the satisfaction of the household current needs and, by implication, - the situation on the labor market.
Auto sales. Despite the importance of the auto industry in terms of both production and sales, the level of auto sales is not an economic indicator widely followed by foreign exchange traders. The American automakers experienced a long, steady market share loss, only to start rebounding in the early 1990s. But car manufacturing has become increasingly internationalized, with American cars being
assembled outside the United States and Japanese and German cars assembled within the United States.
Because of their confusing nature, auto sales figures cannot easily be used in foreign exchange analysis.