The labour market began 2024 on a surprisingly firm note. A 2,000 monthly fall in joblessness was the first decrease in 12 months and followed a smaller revised 2,000 increase at year-end. The dip left the unemployment rate at December's downwardly revised 5.8 percent. This was 0.1 percentage point below the market consensus.

Surveys suggest that the sustained weakness of consumer demand has been impacting businesses' hiring plans for a while, particularly in manufacturing. Even so, firms remain hesitant about shedding staff and it is this reluctance that is key to maintaining what is still a tight labour market. The ECB will be watching very closely. Today's report nudges the German RPI and RPI-P a little firmer but, at minus 39 and minus 38 respectively, both gauges continue to show overall economic activity falling well short of market expectations.

January's unemployment rate is expected to hold steady at December's as-expected 5.9 percent rate.

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.