German unemployment drops in September

ING Global Economics Team ING Economic and Financial Analysis

The post-summer revival of the German labour market was not too bad. However, looking ahead, tentative signs of cyclical improvement could be offset by continued structural weakness.

German unemployment dropped by 67,000 in September, bringing the total number of unemployed to slightly below three million for the first time since June. Compared with previous September performances, this is a relatively middle-of-the-road post-summer revival of the labour market. There have been better and worse September numbers in recent years. It looks as if the gradual worsening of the labour market has paused. The seasonally adjusted unemployment rate actually came down to 6.4%, from 6.5% in August.

Cyclical upswing in a structural downswing

Over the last four years, German unemployment has risen by some 500,000. This gradual worsening reflects textbook economics; with the economy effectively stagnating for more than five years and industry facing severe structural challenges, a deterioration in the labour market was inevitable. At the same time, employment has gradually fallen since 2024 and is down by some 300,000 people. This provides additional evidence of a structurally changing labour market: a shrinking working force due to demographics, sectoral and geographical shifts as a result of the industrial transition and the influence of AI raising entry barriers for graduates. Today’s numbers have only paused this trend, not ended it.

Looking ahead, according to more experimental indicators like hiring rates and job offers on online platforms, the worsening of the labour market has at least come to a halt. This is echoed by the traditional indicators, showing a bottoming out in hiring plans in industry and a slight improvement in services. A cyclical stabilisation should be in the making. However, the structural trends are likely to continue. Previous and potential additional announcements of cost-cutting measures across the automotive industry, among others, will only show up in labour market statistics with a delay. The high level of bankruptcies also suggests that any cyclical improvement could be easily derailed by more negative trends. AI disruption in the labour market could add to this.

Even with the slight improvement, the German labour market is currently not in a state that could give rise to second-round effects from higher energy prices. The increase in unemployment in recent years, combined with job insecurity, offers little room for higher wage demands.

Read the original analysis here

Author

ING Global Economics Team

ING Economic and Financial Analysis

From Trump to trade, FX to Brexit, ING’s global economists have it covered. Go to ING.com/THINK to stay a step ahead.

AUD/USD sits at two-month lows near 0.6950 after Australian CPI data

AUD/USD is sitting at two-month lows near 0.6950 in the Asian session on Wednesday, as below-expectations August Australian underlying CPI data pours cold water on expectations for further RBA interest rate hikes. Chinese PMI data also fail to inspire the Australian Dollar, despite a pause in the US Dollar advance.

USD/JPY stays weak below 157.00 amid Japanese intervention risks

USD/JPY keeps losses below 157.00 in the Asian session on Wednesday, as hawkish BoJ expectations, along with intervention risks, underpin the Japanese Yen, countering dismal domestic factory output and retail sales data. Meanwhile, a broad US Dollar retreat also collaborates to the pair's downside.

Gold flat lines below $4,200, as focus shifts to US ADP and PCE

Gold extends its consolidative price move in the European session, trading near the $4,200 mark. Falling US bond yields drag the US Dollar away from the two-month high, touched on Tuesday, and act as a tailwind for the commodity. However, hawkish US Federal Reserve expectations cap the upside as traders await important US macro data before placing fresh directional bets on the non-yielding bullion.

Bitcoin consolidates below $85,000 amid rising US Treasury yields, derivatives deleveraging

Bitcoin consolidates near $83,000 at the time of writing on Wednesday after bulls failed to close above the key $85,000 level earlier this week. The Crypto King's investors remain cautious amid rising US Treasury yields and several key macroeconomic data releases due this week.

US core PCE inflation set to rise in August, pressuring the Federal Reserve

The United States Bureau of Economic Analysis will publish the Personal Consumption Expenditures Price Index data for August on Wednesday at 12:30 GMT. Market participants closely watch the PCE Price Index because it is the Federal Reserve’s preferred measure of inflation and could influence its policy outlook.

Silver is more volatile than Gold ahead of PCE and NFP. This chart shows the positioning gap

The market’s attention is focused on American data this week, but there’s something only those with a trained eye may be looking at: Gold and Silver positioning gap. Financial markets are moving on fears, mostly related to persistently high energy prices driven by the Middle East war. Sure, the US Dollar (USD) is strong, but at what cost?