The labour market was somewhat weaker than expected this month. Following a slightly smaller revised 9,000 decline in February the number of people out of work was only unchanged at quarter-end which, in turn, left the jobless rate steady at a record equalling low of 6.2 percent.
Vacancies rose 2,000, up from a 1,000 gain in February, and indicative that there is still some scope for renewed falls in unemployment over coming months. That said, the latest increase was much smaller than that seen over much of 2014.
Today's data are consistent with business surveys that have found a clear slowdown in employment growth in recent months. Indeed, at 25,000 the first quarter decline in joblessness was comfortably short of the 37,000 fall recorded in October-December. Still, at least the trend remains in the right direction which is just as well since household spending is very much the driving force behind the current economic expansion.
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.
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