German Economy: The Unemployment Rate Is At 5.5%

According to data released on Tuesday by the Labour Office, Germany’s unemployment rate remained steady in January. According to the Federal Labour Office, the number of unemployed individuals decreased by 15,000 when seasonally adjusted. Reuters polled analysts, and they predicted a 5,000 increase in that number.

Seasonally adjusted, there were 2.5 million fewer unemployed persons in Germany at the beginning of the year. According to Melanie Debono, senior Europe economist at Pantheon Macroeconomics, this is a five-month low, partially reversing some of the increase since June 2022, when Ukrainian refugees were eligible for unemployment benefits.

The seasonally adjusted unemployment rate remained at 5.5% from the previous month. Carsten Brzeski, global head of macro at ING, noted that the labor market had played a significant role in the economy’s resiliency during the past five years. According to Brzeski, the German labor market has become “virtually bulletproof” due to fiscal stimulus, furlough programs, and demographic change.

The Federal Labour Office’s chair, Andrea Nahles, stated that the labor market was stable at the start of the year. She did, however, emphasize that geopolitical and economic uncertainty are still having an impact.

In seasonally adjusted, unadjusted figures, the number of unemployed individuals in Germany increased to 2.6 million in January.

According to the labor statistics, there were 162,000 more unemployed persons in January than there were in December and 154,000 more than there were a year before. According to data released on Monday by the statistics office, Germany’s gross domestic product fell by 0.2% in the last quarter of 2022.

Pantheon Macroeconomics predicted that during the coming months, there would be a little increase in the unemployment rate due to waning labor demand, increasing raw material prices, and banks’ further tightening of business lending requirements.

German Economy: Rates of Eurozone Yields Are Decreasing

Tuesday saw a decline in eurozone rates as investors braced themselves for a 50 basis point rate hike and potentially more aggressive direction at the European Central Bank policy meeting, which came after economic data rekindled concerns about a severe economic slowdown.

According to Joost van Leenders, senior investment strategist at Van Lanschot Kempen, economic indicators from France and Germany indicating a downturn in the European economy impact bond prices. Although there is still some uncertainty, the market expects the ECB to raise rates by 50 basis points twice by March.

The benchmark 10-year government bond yield for the eurozone, DE10YT=RR, decreased by 3.5 basis points (bps) to 2.28%. On Jan. 18, it reached its lowest level in a month, 1.97%, while on Dec. 30, it reached its highest level since July 2011, 2.57%.

According to Holger Schmieding, an economist at Berenberg, “ECB President Christine Lagarde will likely push back against market expectations that the bank will start reducing rates again late this year or in early 2024.”

The deposit rate would top at 3.5% this summer, according to ECB euro short-term rate (ESTR) forwards. Before Spain’s inflation data was announced on Monday, traders predicted that interest rates would reach a peak of roughly 3.3%.

The wholesale overnight euro unsecured borrowing costs for banks in the euro region are reflected in the ECB’s ESTR. Typically, it is 10 bps or so less than the deposit rate. It was higher than the 4.7% predicted by Reuters’s survey of analysts, coming in at 5.8% compared to December’s 5.5%. It was 7.0% in January, up from 6.7% in December, and on Wednesday, the euro area will release its data.

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