German Registered Unemployment Rises in December

The registered unemployment rate in Germany in December ticked up to 5.9% after logging 5.8% in October and in November. The registered rate has been moving up slowly throughout the year. The number of people unemployed increased 0.2% in December, a slowdown from the 0.8% rise in November and the 1.1% increase logged in October. Over 12 months, to six months, to 3 months, the annualized increase in unemployment is rising at a faster rate, as it has increased by 7.4% over 12 months, at a slower 7% pace over six months, then reaccelerated to an 8.6% annual rate over three months.

Wages in Germany lag behind the unemployment statistics and are up-to-date through October. On that cut-off date, the 3-month change in wages shows a drop at a 4.4% annual rate although wages are still up by 4.6% over 12 months. Real wages are up by 0.9% over 12 months but down at a 7.3% annual rate over the last three months. With the unemployment rate rising, there is less support for the labor market and wages are showing that weakness.

We can compare the developments in Germany to the developments in the European Monetary Union using the EU Commission survey that's up to date through November. Accordingly, industrial employment expectations in the euro area have been weakening from a value of 0 in August to a reading of -3 in November. Retail employment expectations have weakened from a level of -1 in August to -2 in November. Service sector current employment- looking at actual conditions here - moved lower from a +1 reading in August to -2 in November; but services expected employment continues to get slightly stronger, moving from a reading of +5 in August to +6 in November, although it had been even higher in both September and in October. Construction employment expectations log a +3 reading in August, weakening in September, but then up to a reading of +4 in November. In the consumer confidence report, there's also an unemployment expectations indicator; it has generally worsened from August moving from a +16 in August to a +18 reading in November.

The look specifically at German employment using the IFO barometer shows that employment conditions have been weakening and the index has moved down from 97 in August to 95.9 in November.

The rankings for the EU and IFO readings show above median results when they log readings above the 50th percentile. For industrial employment expectations, retail employment expectations, and for construction, employment expectations are above their respective medians. For construction the reading is quite firm-to-strong. However, in the service sector, current employment is evaluated at a 22.8 percentile standing which is quite weak; yet expected employment in the service sector has a below median 48.2 percentile standing, that is barely below the median. In the consumer confidence report, unemployment expectations also have a sub-median 42.4 percentile standing. The German IFO barometer reading has the 34.7 percentile standing, also well below its neutral 50-percentile mark.

Summing up Employment conditions in Germany and across the euro area have been generally weakening. The weakness is expressed across industry, retailing, and services with the construction sector generally bucking that trend and continuing to show moderately strong employment expectations. The factory sector globally has continued to be under pressure and Germany, of course, is an important trading nation, depending a great deal on exports. Developments in the global economy may be hurting Germany more than other countries. Certainly, the IFO employment barometer shows weakening conditions and German trends in wages also echo the sentiment of weakness to go along with the December rise in registered unemployment.