DE: Unemployment Rate

Thu Nov 02 03:55:00 CDT 2017

Consensus Actual Previous
Level 5.6% 5.6% 5.6%

The jobs market continued to make solid progress in October. Unemployment fell 11,000 after a marginally steeper revised 23,000 decline in September to lower the number of people out of work to 2.495 million. The jobless rate was 5.6 percent, unchanged from the previous month and in line with market expectations and equalling the post-Reunification low.

Prospects also remained very positive with vacancies rising a further 8,000 on top of the 11,000 announced for September.

The overall performance of the German labour market remains very impressive and should be reflected in stronger consumer spending over coming months. Wages have yet to respond as might be expected but what is clearly a narrowing output gap should translate into higher pay settlements in 2018. If so, inflation next year could surprise on the upside.

The unemployment rate is calculated by the Federal Employment Agency based on the number of unemployed persons as a percentage of the number of all civilian members of the labour force (dependant civilian employed persons, the self-employed family workers and unemployed). Unemployed is defined as persons who between the ages of 15 and 65 and who are without employment or only with short-time employment (currently less than 15 hours per week) and seeking an employment of at least 15 hours per week subject to compulsory insurance.

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.