German Unemployment Declines to 19-Year Low as Export Boom Drives Demand

German unemployment fell below 3 million for the first time in almost 19 years in April in adjusted terms, increasing the likelihood that household spending will boost economic growth.

The number of people out of work dropped a seasonally adjusted 37,000 to 2.97 million, the Nuremberg-based Federal Labor Agency said today, the lowest level since June 1992. The decline matched the median of 34 estimates in a Bloomberg News survey of economists. The jobless rate was unchanged at 7.1 percent.

German companies are hiring as they increase production to meet booming export orders, fueling domestic demand. The government expects the economy, Europe’s largest, to expand 2.6 percent this year after last year’s record 3.6 percent growth. The decline in unemployment has yet to deliver a political dividend for Chancellor Angela Merkel, with polls showing opposition parties would have enough combined support to oust her from office.

“The German labor market has been improving rapidly during the past 18 months” and latest data point to “ongoing robust employment growth and further declines in unemployment,” Aline Schuiling, an economist at ABN Amro in Amsterdam, said in a note to investors. “Wage growth should pick up this year and next.”

Creating Jobs

German factory orders and industrial production rose more than economists predicted in February. The Bundesbank said on April 18 the country’s “positive economic fundamental trend should continue” in the three months through June.

More than a third of Germany’s medium-sized companies plan to take on staff in the second quarter, Impulse magazine said on April 25, citing an ASU family-owned businesses association survey of 385 companies. Almost two-thirds want to keep payrolls unchanged while 4 percent seek to reduce staff.

Closely held automotive supplier ZF Friedrichshafen AG plans to create 5,000 jobs by the end of this year, including 2,000 in Germany, on expectations of “significant sales and profit growth,” Chief Executive Officer Hans-Georg Haerter said on April 21 on the company’s website.

German automakers continued to have “strong” sales in Russia, India and China in March, the VDA automakers’ lobby said on April 19. German carmakers’ first-quarter unit sales in China rose 30 percent to about 637,800 vehicles, VDA said on April 15.

Comparable Data

The latest comparable data from the Organization for Economic Cooperation and Development show Germany’s jobless rate was 6.3 percent in February while the average for the 17 euro nations was 9.9 percent. France, the second-largest euro-area economy, had 9.6 percent unemployment, the U.S. had 8.9 percent and Spain had 20.5 percent.

In non-adjusted terms, the number of jobseekers in Germany declined by 132,000 to 3.08 million in April and should drop below 3 million in May, Labor Agency head Frank-Juergen Weise told reporters in Nuremberg.

Still, with political turmoil in the Middle East and uncertainty over the duration of Japan’s nuclear crisis damping the global economic outlook, hiring in Germany may soon pause. The Labor Agency’s BA-X indicator of labor demand, published yesterday, rose 2 points to 167, which it described as a “less dynamic” gain than in previous months.

Confidence Slips

German consumer confidence will decline for a second month in May as households grapple with higher food and energy prices, Nuremberg-based market research company GfK AG said yesterday. Business confidence fell for a second month in April after oil prices rose to the highest in 2 1/2 years, the Ifo institute in Munich said on April 21.

German inflation, calculated using a harmonized European method, accelerated to 2.6 percent in April from 2.3 percent in March, the Federal Statistics Office in Wiesbaden said yesterday. Consumer-price developments are casting a “slight shadow” on an otherwise “positive” outlook for the economy, the Economy Ministry said on April 19 in its monthly report.

The opposition Greens and Social Democratic Party maintained support to form a government for the fourth straight week, according to a poll for Stern magazine published yesterday. The parties’ combined lead over Merkel’s coalition narrowed 3 percentage points, to 14 points.

For now, “companies are showing a high inclination to hire, with some of them reporting difficulties to find qualified staff,” the Labor Agency said yesterday. While temporary work companies are hiring the most, retailers, builders, restaurants and health-care companies are also taking on “numerous” workers, it said.

ECB Concern

“The buoyancy of the German labor-market data will be reinforcing concerns at the European Central Bank over capacity constraints and the potential for a spill-over to wage dynamics,” Ken Wattret, chief euro-region market economist at BNP Paribas SA in London, said in a note to investors.

The ECB on April 7 raised its benchmark rate for the first time in almost three years, by a quarter percentage point to 1.25 percent. President Jean-Claude Trichet said policy makers must ensure the oil-driven jump in inflation doesn’t fuel wage and price expectations.

The full opening of the German labor market on May 1 to workers from eight eastern European Union countries is “a great chance” for Germany to avoid a skilled-worker squeeze, Labor Minister Ursula von der Leyen said in an e-mailed statement today in Berlin. The Labor Agency expects around 100,000 workers per year to take advantage of the new rules, she said.

To contact the reporters on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net; Christian Vits in Frankfurt at cvits@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Craig Stirling at cstirling1@bloomberg.net

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