In July 2025, Germany’s unemployment rose by 2,000, which was much lower than the expected 15,000, according to the Federal Employment Agency. The unemployment rate stayed the same at 6.3%, compared to the anticipated 6.4%. Previously, unemployment had increased by 11,000, with the rate still at 6.3%. While there are signs of a weakening labor market, the situation is manageable for now.

German Labor Market Resilience

The German labor market proved to be more robust than expected this July. The slight rise of 2,000 in unemployment was far better than the anticipated 15,000. This indicates that Europe’s largest economy is faring better than many had feared. This stable job situation is a positive sign for German stocks. The DAX index has stabilized around 18,500, and this news might be just what it needs to push towards the higher end of its recent range. Selling out-of-the-money put options on the DAX could be a good strategy to earn premiums, as a major downturn seems less likely now. The European Central Bank (ECB) is concerned about persistent inflation, which was recorded at 2.8% for the Eurozone in June. The strong job data gives the ECB less reason to consider lowering interest rates from the current 3.75% anytime soon. This should provide support for the Euro, making long EUR/USD positions more appealing.

Weakness in Manufacturing Sector

Although the situation is better than expected, we can’t ignore signs of weakness. Recent manufacturing PMI data, while slightly improving, still indicates contraction at below 45. This reinforces the idea of “controlled weakness” rather than a strong recovery. It suggests any market gains will likely be slow and steady, not explosive. The absence of negative surprises should help reduce market volatility in the coming weeks. We saw implied volatility on the Euro Stoxx 50 decrease after the report was released. Traders might consider strategies that profit from falling or sideways volatility, such as selling straddles on major indices. Looking back at the turbulence caused by the energy crisis of 2022 and 2023, this period feels much more manageable. The labor market’s ability to cope with economic shocks seems to have improved since then. This historical resilience boosts confidence that a severe recession isn’t imminent. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now