One of the key indicators of the strength of an economy is the number of people in employment. More individuals in work mean more taxes collected and more consumer spending. This consumer spending spreads across all areas from major purchases like property and cars to FMCG (fast moving consumer goods) to travel and luxury goods.
Fewer people in work means less spending across the board and fewer taxes (less income tax for example or less VAT collected on purchases). More people out of work also places an additional burden on state finances as there is increased expenditure on social programs and welfare.
These economic factors make published unemployment figures a critical report on the health of a country’s economy. Not so much the absolute number of unemployed but rather the change on a month on month basis. The total number is, of course, an important metric but to track economic growth, the change in the unemployment figures carries more weight. If for example we had 500,000 unemployed in June and 250,000 in July, that would be a strong indicator of a growing economy, with more people getting back into employment on a month on month basis and the unemployment figures decreasing. If however, the June figure was 500,000 and July was 750,000, then that would point to a slow-down in the economy. Growing economies create jobs. Declining economies create unemployment.
Friday the 29th sees the release of the German Unemployment Change for September. Compiled by the Bundesagentur für Arbeit (Federal Employment Agency) and published by Destatis (Federal Statistical Office). The report uses seasonally adjusted figures for a more accurate metric.
Any increase in the report data has negative implications for the health of the German economy. In broad terms, a reading above consensus expectation would point to a downturn (Bearish outlook) while a reading below consensus would point to an upturn (Bullish outlook) for the German economy.
German Figures 2016 – 2017
Figures for Germany have been broadly encouraging for the last few years with approximately 1.5 million unemployed in July 2017, compared to 1.76 million in the same month of 2016, with a rise in the month on month employment figures of 1,000 in July 2017, putting the German workforce at 44.2 million people in work. The adjusted unemployment rate in Germany for July 2017 stood at 3.7%.
Any other economy in the Eurozone would be chomping at the bit for figures like that. Compare that to Greece for example with a 21.2% unemployment rate (down from 23.2% at the start of the year) or Spain (17.2% in July down from 18.6% at the beginning of the year) and the German figures start to look even better than they are.
For the Eurozone’s economic powerhouse though, even these figures are too high.
“It is a fact that, if I single out Germany, our rate of growth is too low and we have very high unemployment”
Recent Elections In Germany
While the recent Bundestag election results are too recent to have had any real effect on the unemployment figures, political developments in Germany point to a country with more skeletons in the closet than anybody could have imagined.
Who would have believed that a country with Germany’s relatively recent history of far-right extremism would have sent the right-wing AfD to the Bundestag as the third largest party with close to 13% of the vote?
Unemployment figures are a key metric for any country. For an economy like Germany, with a hugely significant manufacturing base, unemployment numbers are crucial, so make sure to mark your calendar for Friday, September 29th at 08:00 GMT for the official release.
This article is for educational and informative purposes only and should not be considered as investment or trading advice.