DE: Unemployment Rate

Tue Jun 02 02:55:00 CDT 2015

Consensus Actual Previous
Level 6.4% 6.4% 6.4%

The labour market continued to tighten in May but only marginally. A 5,000 monthly fall in the number of people out of work was the smallest since it began declining last October and not sufficient to reduce the jobless rate from the 6.4 percent mark seen since March.

However, on the brighter side, April's drop in unemployment was nudged 1,000 steeper to 9,000 and vacancies jumped a relatively sharp 9,000, up from their upwardly revised 6,000 increase at the start of the quarter.

Nonetheless, May's modest dip in joblessness was consistent with recent business surveys in pointing to disappointingly sluggish growth by the German economy. The average fall in unemployment in April/May was just 7,000, only half the decline registered over the first three months of the year and even further behind its 22,000 drop in the fourth quarter. Second quarter GDP seems unlikely to impress.

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.