DE: Unemployment Rate

Thu Mar 29 02:55:00 CDT 2018

Consensus Actual Previous
Level 5.3% 5.3% 5.4%

The labour market continued to make good ground in March as joblessness declined a further 19,000 following a slightly larger revised 23,000 drop in February. The unemployment rate dipped a tick to hit a new post-Reunification low of 5.3 percent, in line with market expectations.

Vacancies were up 1,000 on the month, matching February's advance but well short of the gains posted over much of last year. This may be a sign that the demand for labour has begun to cool in which case further reductions in the jobless rate will be that much harder to achieve.

Nonetheless, at some 64,000, the first quarter decline in unemployment was impressive and easily large enough to suggest another robust period for economic growth.

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.