Why does Germany have two unemployment rates, 6.4% and 4.0%? Explain registered versus ILO unemployment simply

In the same week you could read that German unemployment was 6.4% and that it was 4.0%. Germany's Federal Employment Agency reported a registered unemployment rate of 6.4% for September, with 2,994,000 people registered as unemployed (report). Eurostat's euro area release put Germany at 4.0% for August (report). Neither is wrong.

The 6.4% counts people registered as unemployed with the labour agency. It depends on the rules for registering, and who counts as unemployed under German law, which can change when the rules do. The 4.0% uses the International Labour Organization (ILO) definition: people without a job who have looked for work in the last four weeks and could start within two weeks. It comes from a survey, and is designed to be comparable between countries.

The agency's own report says the ILO measure of unemployment is about 1.86 million in August, against 3.06 million registered unemployed, because the two count different groups.

That is why the euro area's 6.4% rate and Germany's 6.4% registered rate being the same number is a coincidence.

Please explain it as simply as you can:

• How would you explain the two definitions to a friend?
• Which measure do you look at when you trade the euro, and why?
• Which other countries do you know that have two or more headline unemployment rates?
• What does each one miss?

Please keep replies friendly and practical. Posts that promise a direction or sell signals will be removed.