German Unemployment Better Than Anticipated

Alan Penny

30 January 2020

3 min read

germna flag ifo

  • Unemployment resilient in EU’s largest economy
  • Yet to see backlash from coronavirus
  • Strong signs of EU stabilizing

Early on Thursday, the Germans released unemployment figures, which will have a major influence on what happens next in the European Union. Germany is a major component of the EU’s economy, and this has strong implications when it comes to where the European markets go in general, well beyond just the DAX.

The announcements

The initial release that came out on Thursday was the German Preliminary CPI month-over-month figures, which came in at -0.6%, showing a severe lack of inflation. That being said, it was right in line with anticipation, so it had little influence on the market.

Furthermore, there was a whole slew of economic announcements during the day for multiple countries. Anticipation for these is what probably kept traders somewhat benign earlier in the day.

perhaps, Europe is starting to see a little bounce

Shortly after, the German Unemployment Change figures came out for the month of January, with a reading of -2000 printed, as opposed to the expected gain of 5000. This means the employment picture is brightening somewhat in Germany, with the idea that, perhaps, Europe is starting to see a little bounce economically speaking.

As Germany goes, so goes the rest of the European Union, so this will have an influence on several different assets, not just the DAX. For example, the euro responded positively early in the session.

Even with that, there are other ramifications of a stronger German labor market. This could be read as a sign that perhaps the global markets may be seeing signs of strengthening, as Germany is such a huge exporter of large products.

Even so, do not read too much into these figures, as this will not yet incorporate the effects from the coronavirus, so there is a certain amount of caution to be exercised here.

However, all things being equal, it does look relatively positive, and it could give the idea of “green shoots” in the economy when it comes to the EU.

German figures will be scrutinized carefully

Going forward, the German employment figures will be scrutinized, because of the massive amount of exports that the country is responsible for. Ultimately, the idea of growth is up in the air, as the effects of the virus in China will be seen further down the road. That is mainly because of the supply chain implications that China brings forth.

It does appear that the European Union is at least trying to stabilize in general, looked at through the prism of employment and several other indicators. It is more or less a situation where things aren’t falling drastically anymore, so that is the beginning of the possibility of a change in attitude coming out of the EU.

As a subsequent side note, the Swiss KOF Economic Barometer came out at 100.1, as opposed to the expected reading of 97. This is a composite of Swiss economic activity, which is highly tied to Germany. And as it shows signs of being better than anticipated, that could be another hint that the European continent is starting to come out of all of the previous negativity.

Written By
Alan Penny

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