German unemployment dropped in July for a 25th straight month as company recruitment plans continued to hold up in the face of weakening global demand and Europe’s debt crisis.
The number of people out of work fell a seasonally adjusted 11,000 to 2.96 million, the Nuremberg-based Federal Labor Agency said today. Economists forecast a drop of 15,000, according to the median of 31 estimates in a Bloomberg News survey. The jobless rate held at 7 percent for a third straight month, the lowest since records for a reunified Germany began in 1991.
“The German labor market is defying the global soft patch, financial turmoil and the sovereign debt crisis,” Carsten Brzeski, an economist at ING Group in Brussels, said in an e-mailed comment. “Looking ahead, even if employment expectations are currently slowing down somewhat, unemployment is bound to drop further.”
After more than two years of consecutive monthly drops in joblessness, mounting pessimism that the euro region’s debt crisis can be contained is threatening companies’ appetite to invest. Business confidence and investor optimism fell more than economists forecast in July, while European services and manufacturing barely expanded.
“Hiring continues, but not with the same big steps that we’ve seen,” Andreas Scheuerle, an economist at Dekabank in Frankfurt, said before the report was released. “There’s been a lot of improvement already in the labor market and it’s getting increasingly difficult to make further improvements.”
The euro rose after the report before slipping to $1.4289 as of 1:36 p.m. in Berlin.
The positive development of the German labor market will likely continue into 2012, Heinrich Alt, a Labor Agency board member, told reporters in Nuremberg today.
The fall in unemployment “has weakened compared with the start of the year,” the agency said in an e-mailed statement. “Demand for labor is at a high level, but has lost dynamism.”
The labor agency’s BA-X indicator, a measure of labor demand in Germany, dropped three points in July to 163, one of just two declines in as many years.
A composite index of services and manufacturing growth in the euro area, Germany’s main export market, fell to 50.8 in July from 53.3 in June, London-based Markit Economics said July 21. A reading below 50 indicates contraction.
Gross domestic product in the U.K., Germany’s biggest European market outside the euro region, rose just 0.2 percent from the first quarter, while China’s manufacturing may contract this month for the first time in a year, preliminary purchasing managers’ data released last week by HSBC Holdings Plc showed.
For now, demand for German goods is underpinning jobs growth. MAN SE has created over 4,500 jobs worldwide since January with about half of the positions in its German home-market, Joerg Schwitalla, personnel chief at Europe’s third-biggest truckmaker, said in an interview today. More than 1,000 positions alone were opened in Munich, where MAN is based, mainly at the company’s truckmaking operations.
“Our products made in Germany are enjoying strong demand around the world,” Schwitalla said.
Daimler AG’s Mercedes-Benz division’s plant in Untertuerkheim has reached an agreement with its works council to create 600 new jobs this year, the company said in an e-mailed statement on July 22.
Even so, German consumer confidence will drop for a fifth month in August on uncertainty about spillover-effects from Greece’s debt crisis, GfK SE said July 26. Separate measures of household economic expectations, consumer willingness to spend and income expectations all dropped in July.
“Ifo business expectations are heading down,” said Scheuerle, who expected adjusted unemployment to decline by 5,000. “That’s a pointer for companies’ investment activities,” which are closely linked to job creation.
According to comparable data from the Organization for Economic Cooperation and Development, Germany’s jobless rate was 6 percent in May, France’s was 9.5 percent, the euro-region average was 9.9 percent and the U.S. had 9.1 percent unemployment.