Unemployment Spike to 2.96M Weighs on German Equities, DAX Retreats by 0.37%

Key Moments:

Markets React to Job Data

Germany’s DAX index experienced a volatile trading session on Wednesday. Early hours saw the benchmark reach an intraday high above 24,300 before it retreated near 24,100 after the publication of May’s unemployment figures.

According to data reported by the Labor Office, the German labor market continued to deteriorate in May, with the number of job seekers increasing by 34,000 on a seasonally adjusted basis. This brought the total figure to 2.96 million, the highest unemployment count in ten years.

Additionally, the seasonally adjusted jobless rate remained unchanged at 6.3%. Excluding the pandemic period, this is the highest level seen since December 2015. Labor Office Chief Andrea Nahles noted that the job market was lacking sufficient momentum and warned of a further downturn through the upcoming months.

Labor Demand Continues to Soften, Mixed Economic Signals Provide Uncertain Outlook

Despite persistent labor shortages in certain sectors, overall job demand proved insufficient to halt unemployment’s upward trajectory. May witnessed the number of open positions sink to 634,000, down from last year’s 701,000.

While the labor market data painted a bleak picture, some recent developments suggest the German economy may be stabilizing as some indicators have trended upward since the start of the year. Business sentiment, as captured by surveys like the Ifo index, has shown signs of improvement. Additionally, Germany posted a 0.4% GDP increase in the first quarter, which was largely driven by heightened export activity ahead of the Trump administration’s anticipated duties.

Looking ahead, there is cautious optimism that fiscal support could reinvigorate growth. Ahead of Chancellor Friedrich Merz’s official inauguration, lawmakers amended the so-called debt brake, unlocking approximately $1 trillion in funds that will be designated for infrastructure and defense spending. However, challenges remain, particularly concerning US tariffs, as President Donald Trump is planning to impose a 50% levy on European goods starting July 9th.