The labour market continued to loosen in mid-quarter. A 25,000 increase in the number of people out of work was more than double the April rise but not steep enough to boost the jobless rate which, at 5.9 percent, was unchanged and matched the market consensus.

Looking ahead, vacancies fell again, this time by 5,000 after an 8,000 drop in April. The demand for new hires remains down, albeit still quite modestly so.

The May update is in line with an economy that has only just started to recover from near-recession. Indeed, rising joblessness threatens to keep a lid on household spending which contracted last quarter and has essentially only flatlined since the middle of 2023. To this end, the German RPI now stands at 13 and the RPI-P at minus 10, both values showing economic activity in general running slightly behind market forecasts.

May's unemployment rate is expected to hold steady at April's 5.9 percent. Germany's jobs market remains tight and continues to support wage 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.