German Unemployment Change indicates the exact number of current residents of Germany who have joined/left the workforce in the previous months. Negative values correspond to the decreasing unemployment, positive ones indicate that more jobs have been lost than picked up.
What’s so bad about unemployment?
While a certain unemployment rate is “natural” for any market-oriented economy, high levels of unemployment can be disastrous for both individuals and the whole of society.
When unemployment is on the rise, the amount of income taxes collected by the government decreases. The unemployed tend to cut down their consumption and pay less in expenditure taxes. As if all this were not enough, the jobless begin to rely more on government support in form of direct unemployment benefits, medical services, (re-)education and food stamps. Missing income tax. Due to lower tax income, the government has to increase corporate tax (which in turn hurts the employment rates even more). Thus, the vicious circle continues.
The list of negative consequences is not limited to short-term financial losses and can include long-term disruptions in economic, social and innovative development.
How does the unemployment rate affect the stock market?
Investors expect national economies with high unemployment rates to perform worse. Negative expectations make traders to go short on a national currency, pushing down the exchange rates.
Foreign exchange is not the only market affect by the metrics. The lower the unemployment, the better the stock market is doing. At least, that’s the general rule. As stated by certain experts, extraordinary low unemployment can be a harbinger of an upcoming recession.
High unemployment in Germany can affect the Euro in a negative way and hit the stock prices of the German-based companies. This indicator is tightly connected to the German PMI.
