In December, Germany's labour market remained under strain, with the unemployment rate steady at 6.1 percent, and the number of unemployed individuals rising to 2.869 million from 2.860 million. December was the 24th month of elevated unemployment, reflecting ongoing pressure on the labour market and a cautious hiring outlook among employers. Notably, job vacancies rose by 6,000, a shift from the 6,000 decline in November suggesting renewed growth in hiring demand and optimism in the labour market.

Despite the rise in job vacancies, current labour market conditions suggest a likely downturn in consumer spending and economic growth, as the ongoing rise in the number of unemployed individuals weakens household income and spending power. Today's update leaves the German RPI at 10 and the RPI-P at 3, both readings showing economic activity in general running in line with market expectations.

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.