DE: Unemployment Rate

Thu Nov 30 02:55:00 CST 2017

Consensus Actual Previous
Level 5.6% 5.6% 5.6%

The labour market continued to make respectable progress in November with the number of people out of work declining a further 18,000 on top of a marginally steeper revised 12,000 fall in October. The jobless rate held steady at 5.6 percent, in line with market expectations.

Prospects also remain positive as vacancies rose another tidy 8,000, up from 7,000 in October.

Unemployment has fallen 52,000 over the last three months, its sharpest decrease since the three months ending April. This suggests that the demand for labour is still very robust, a view supported by the upbeat picture of the economy painted by both the November Ifo and (flash) PMI surveys. While the transmission has been slow this cycle, the ongoing market tightening should translate into higher wages in due course which, in turn, will put additional upside pressure on inflation.

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.