DE: Unemployment Rate

Thu Feb 26 02:55:00 CST 2015

Consensus Actual Previous
Level 6.5% 6.5% 6.5%

The labour market made further ground this month as seasonally adjusted unemployment fell 20,000 after a marginally steeper revised 10,000 decline in January. The latest drop was the fifth in as many months albeit not quite enough to reduce the jobless rate which remained at 6.5 percent for a third consecutive month.

The slide in unemployment was accompanied by another rise in vacancies which were up 2,000 after a 5,000 increase at the start of the year.

The apparent buoyancy of the jobs market this month follows January's 41,000 increase in employment, the largest since October, and is consistent with what should be another quarter of solid economic growth.

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.