DE: Unemployment Rate

Wed Sep 30 02:55:00 CDT 2015

Consensus Actual Previous
Level 6.4% 6.4% 6.4%

The German labour market was largely static in September. A surprise 2,000 monthly increase in the number of people out of work followed a minimally smaller revised 6,000 drop in August and left the jobless rate at the 6.4 percent historic low at which it has been pegged since April.

September's reversal means that over the third quarter as a whole, unemployment was unchanged from its second quarter level, suggesting that economic growth is starting to struggle. However, in line with recent months there were further signs that skills shortages may be hindering employment gains. Hence, vacancies continued to rise, and followed August's unrevised 4,000 increase with a slightly stronger 5,000 advance.

In general then the labour market would still appear to be in reasonably good shape. Nonetheless, with some surveys now finding creeping jobless worries in the wake of slowing global growth and the hefty influx of refugees, the medium-term outlook could well be less robust.

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.