DE: Unemployment Rate

Thu Jan 29 02:55:00 CST 2015

Consensus Actual Previous Revised
Level 6.5% 6.5% 6.5% 6.6%

The labour market made only limited progress this month and that after a slightly weaker revised performance in December. The jobless rate was 6.5 percent, in line with market expectations but only after an upward revision to the December rate which now stands at 6.6 percent.

Overall unemployment dropped just 9, 000 on the month following a smaller revised 25,000 slide last time. The latest decline was the least marked since the number of people out of work started to fall again in October. Vacancies, which have made solid progress in recent months, were similarly less robust, registering a 6,000 increase following a 9,000 gain last time.

Meantime, according to the December ILO data released earlier this morning, employment rose 22,000 in December for an 80,000 fourth quarter gain, up from the third quarter's 71,000 advance.

Overall today's labour market update suggests that the German economy is performing moderately well. In fact, just yesterday the Economics Ministry revised up its 2015 growth forecast from the 1.3 percent call it made last October to 1.5 percent, in large part reflecting the boost to consumer confidence afforded by an expected strong labour market.

The unemployment rate measures the number of unemployed as a percentage of the labor force for unified Germany. Financial markets tend to focus on the seasonally adjusted data released by the Federal Employment Agency as these are the most up to date.

A snag to understanding German unemployment data comes from the fact that there are several measures of unemployment available. Unemployment rates calculated by the Bundesbank are preferred but some German analysts check the unadjusted rates as well. And then there are still different rates for unemployment that are used by Eurostat to compute their unemployment rate. The spread between the Bundesbank rates and Eurostat can be quite significant. The reason for the often sizeable differential is found in the interpretation of the ILO definition.

Unlike in the U.S. no wage data are included in this report. But by tracking the jobs data, investors can sense the degree of tightness in the job market. If labor markets are tight, investors will be alert to possible inflationary pressures that could exist. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.