DE: Unemployment Rate

Wed Jan 03 02:55:00 CST 2018

Consensus Actual Previous Revised
Level 5.5% 5.5% 5.6% 5.5%

The jobless market ended the year on a very robust note. Following a slightly larger revised 20,000 drop in November, the number of people out of work declined a further 29,000 in December, the steepest monthly fall in six years. The unemployment rate was 5.5 percent, matching the previous period's downwardly revised outturn and marking a new post-Reunification low.

The demand for new hiring was similarly robust and vacancies were up 18,000 or almost double their larger revised 10,000 gain in mid-quarter.

The December report means that unemployment declined fully 62,000 during the fourth quarter, its sharpest decrease since January-March and consistent with another very strong period for GDP growth. Taken together with the accelerating rise in vacancies, the signs are that the German economy was poised to start 2018 in very good shape indeed.

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.