Labour Market Softening Despite Employment Rise

German employment rose further in January at +0.1% M/M (+57k) in seasonal-adjusted terms, according to Destatis. However, the details on the German labour market, which are reported by the federal employment agency, look less positive (although some of these refer to December).

• The recent increases in employment have largely been driven by part-time employees according to the employment agency press release (in the year to December, part-time employment increased +1.9% Y/Y to 10.53m (+199k) vs +0.4% Y/Y for total employment).
• Total hours worked in Germany decreased towards the end of 2023 (-1.0% Q/Q Q4, -0.3% Q3), almost levelling gains from earlier in the year. German total hours worked is still below pre-pandemic levels, in contrast to France, Italy and Spain.
• Unemployment rose by +11k in (vs +5k cons; -2k prior, revised from +1.0k) to 5.9% in February (vs 5.8% cons) while January was revised up from 5.8%.
  • The uptick comes amid a very low unemployment exit rate (the rate at which people move out of unemployment), which printed at 5.7% on a 12mma basis in February. This is a historically low value according to the federal employment agency, and has only been lower in the first half of 2021 and during the pandemic.
  • Conversely, the "entry" rate, the rate at which employees become unemployed on average, printed at a very low 0.54% average in the last 12 months.
• This suggests that given the poor recent economic performance, employers have been unwilling to extend hiring but also remain reluctant to cut staff as of now - suggesting low mobility in the German labour market.