The labour market continued to loosen in October. Following an upwardly revised 12,000 increase in September, the number of people out of work rose a further 30,000 on the month. This was enough to lift the jobless rate a tick to 5.8 percent, its highest reading since June 2021. Although the rate matched the market consensus, the increase reflects the dismal state of the German economy and boosts the likelihood of recession arriving by year-end.

Moreover, the downtrend in the demand for new hires was also extended as vacancies dropped 3,000 although this was at least less than the previous month's 8,000 fall.

Overall today's report is soft and should help to underpin the ongoing decline in inflation. The October data put the German RPI at minus 4, indicating economic activity in general performing much as expected. However, excluding inflation, the RPI-P (12) shows the real economy running just slightly hotter than expected.

October's unemployment rate is expected to edge a tick higher to 5.8 percent.

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.