GERMAN DATA: Is the German Labour Market As Soft As Market Participants Think?
Jan-08 11:52
Any softening in the German labour market seems slower than previously. There are quite a few individual datapoints pointing towards stability in the quantities side of the German labour market towards year-end. Individually we wouldn't pay too much attention to any of these but collectively these data do challenge the wider narrative that the German economy and in particular the labour market are softening. We have looked at four such indicators below:
- Unemployment rose less than expected in December (+3k vs 5k cons, 1k November) on a seasonally-adjusted basis. The unemployment rate meanwhile, as expected, remained at 6.3% for the tenth consecutive month - by far the longest holding period since it started an uptrend in early 2022.
- Employment was materially unchanged in November (latest), falling 1k over the month, at 45.8mln (third consecutive month of almost no movement, seasonally-adjusted Destatis data).
- The expected number of employees impacted by 'Kurzarbeit' (which has to be reported in advance by companies and can be interpreted as an early indicator for future use of state benefits) has remained roughly stable in recent months (43.5k most recently), while the actual number of employees impacted indeed trended down but the data here here is much delayed (195.4k June).
- Vacancies ticked up for the second consecutive month in December, for the first time since they topped out in 2022, at 633k vs 626k November (August - September all saw the post-pandemic low of 616k). Also new vacancies seem to have at least stabilized.
- In contrast to the above four indicators, the main indicator that is still pointing to weakness is the IFO employment barometer which fell to 91.9 points in December, to its lowest level since May 2020, from 92.5 in November.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
BONDS: /SWAPS: ING Remain Remain Of Further EUR Steepening
Dec-09 11:48
ING remain wary of the risks of a further extension higher in EUR long end yields and swap rates, noting that “whilst the move up in rates happened sooner than we anticipated, we do think higher rates are justified from a structural perspective”.
- They flag that “the growth outlook for 2026 looks decent, whilst from a supply perspective we should also get more upward pressure. Germany’s funding announcement is likely next week and in January we expect plenty of frontloading of funding plans, both placing supply in focus for the coming weeks. In between, around EUR600bn of Dutch pension fund assets will transition to a new system, drastically reducing the amount of longer-dated swaps and bonds needed”.
- ING continue to argue that “the front end has little room to go higher for now, given more inflation data is needed before seriously contemplating a rate hike. The 10-Year swap rate, however, could still move higher as term premium builds. 2s10s is still relatively flat compared to the average of 80bp since 2000. One could also look at long-term nominal growth expectations as an anchor for longer rates. In that case, having the 10-Year swap rate settle around 3.0-3.5% would be considered fair value”.
OPTIONS: Expiries for Dec09 NY cut 1000ET (Source DTCC)
Dec-09 11:47
- EUR/USD: $1.1585-90(E1.7bln), $1.1600(E755mln), $1.1675(E784mln), $1.1760(E1.3bln)
- EUR/GBP: Gbp0.8785-92(E530mln)
- AUD/USD: $0.6330-35(A$1.2bln)
STIR: Terminal Fed Yield Highest Since July Day Out From FOMC Decision
Dec-09 11:46
- Fed Funds implied rates are unchanged on the day, broadly set up for a hawkish Fed cut tomorrow with 23.5bp of cuts priced but then a next fully priced cut not seen until June.
- Today labor data in focus, with the return of weekly ADP tracking after the full monthly report last week before two months of JOLTS data later.
- Cumulative cuts from 3.89% effective: 23.5bp Dec, 30bp Jan, 38bp Mar, 43.5bp Apr and 55.5bp Jun.
- SOFR futures have pared earlier losses and are mostly 0.5-1 tick firmer today looking out to end-2027. It consolidates a sizeable hawkish shift further out the curve in the past three working days, with the implied terminal yield at 3.175% (H7) after yesterday’s 3.18% was the highest close since July.
- MNI Fed Preview: https://media.marketnews.com/Fed_Prev_Dec2025_With_Analysts_4d5a318a2b.pdf
