German labour market holds its own in face of slowing economy

Published Thu, Oct 30, 2014 · 10:52 AM

[FRANKFURT] Unemployment in Germany, Europe's biggest economy, fell unexpectedly this month, as the labour market shrugged off cooling economic conditions all around, data showed on Thursday.

The number of people registered as unemployed in Germany fell by a seasonally-adjusted 22,000 to 2.887 million in October, the Federal Labour Office said.

That was better than analysts' expectations who had been counting on a slight rise in the jobless figure this month.

And the unemployment rate - which measures the jobless total against the working population as a whole - was steady at 6.7 per cent in seasonally adjusted terms, the office calculated.

In raw or unadjusted terms, the jobless total fell by 75,000 to 2.733 million and the jobless rate dropped to 6.3 per cent from 6.5 per cent.

The office attributed the improvement partially to a calendar effect.

The labour market usually picks up in the autumn as companies and businesses re-hire people following the summer holidays.

But because the holidays were late this year, the usual boosting effect occurred only in October rather than in September.

Looking beyond that, however, the German labour market remains resilient, the office insisted.

"The labour market is displaying none of the uncertainty" seen on the economic growth front, following a 0.2-per cent contraction in the economy in the second quarter, it said.

Analysts were also cheered by the data.

"Headline data from Germany's buoyant labour market give little indication that the economic rough patch is having an impact on jobs," said Berenberg Bank economist Christian Schulz.

But the German economy was not out of the woods yet, Mr Schulz warned.

"The jobs market may not escape the investment slowdown entirely unscathed, in particular as the introduction of the national minimum wage in January will increasingly weigh on companies' hiring decisions." The German government is introducing a legal minimum wage for the first time next year, which critics say will have a negative effect on unemployment.

ING DiBa economist Carsten Brzeski said the German labour market "remains solid as a rock, defying all woes from a weakening industry." "The fall revival of the German labour market is gaining momentum. Now that finally all Germans are back from vacation, the labour market is accelerating," he said.

BayernLB economist Stefan Kipar was more cautious, saying that while the current economic situation "does not mean we can expect a further sharp pick-up on the labour market in the coming months.... there is also no sign of a negative downturn." The labour market was more likely to move sideways over the next months, providing support for domestic consumption, which is the main engine of growth in Germany at the moment, Mr Kipar said.

Natixis economist Johannes Gareis said the new data "suggest that the German job market remains resilient like a rock, despite the cooling of the economy." "This is further evidence that the German economy should avert falling back into recession. The solid performance of the German labour market over the course of this year should further support household income and as well as private consumption, bolstering growth in the foreseeable future," he concluded.


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