German Unemployment Extends Drop in Sign of Robust Economy

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The number of people out of work fell by a seasonally adjusted 16,000 to 2.706 million in April, data from the Federal Labor Agency in Nuremberg showed on Thursday.

Photographer: Krisztian Bocsi/Bloomberg
  • Number of jobless fell for seventh straight month in April
  • Unemployment rate remains at record low level of 6.2%

German joblessness extended its decline, underscoring the strength of the labor market as Europe’s largest economy seeks to absorb a wave of refugees.

The number of people out of work fell by a seasonally adjusted 16,000 to 2.706 million in April, data from the Federal Labor Agency in Nuremberg showed on Thursday. That’s the seventh consecutive drop, and compares with a median estimate in a Bloomberg survey for no change. The jobless rate stayed at 6.2 percent, the lowest level since German reunification.

The reading signals that German economic growth is strong enough to prompt companies to tap into a pool of potential workers that is rising after the country admitted more than 1 million migrants in 2015. The labor market has been a cornerstone of the nation’s recovery, supporting domestic demand as exports waver in the face of a global slowdown.

“Despite the recent drop in exports to China and other emerging markets, Germany continues to create ever more jobs,” Holger Schmieding, chief economist at Berenberg Bank, said in an e-mailed note. “Domestic demand looks set to remain a pillar of strength at the core of Europe, helping the euro zone to leave its current soft patch behind and return to trend growth of around 1.6 percent by mid-2016.”

Price Growth

That should come as good news for the European Central Bank as it seeks to stoke price growth in the euro area with a mix of low rates, bond purchases and cheap loans. A separate report on Thursday showed economic confidence in the region rose in April, snapping three months of declines.

The number of people out of work dropped by 7,000 in western Germany and by 9,000 in the eastern part of the country, the report showed. German companies are again planning to recruit more staff after three consecutive months of decline with manufacturing and services leading the recovery, an employment gauge by the Munich-based Ifo institute showed on Wednesday.

The outlook could yet deteriorate. Germany’s manufacturing and services sectors cooled slightly in April, leaving the economy in a phase of “unspectacular” growth, Markit said last week after publishing its purchasing managers survey. The Bundesbank sees slowing momentum in the economy this quarter after a strong expansion in the first three months of the year.

Non-Europeans

The report from the Labor Agency also showed that non-Europeans from asylum-seeking countries were the only group with rising joblessness in April, underscoring the challenge of migration for the labor market. The number out of work rose 10.7 percent from the prior month and 89.8 percent from a year earlier, even as Germans saw unemployment decline.

The impact of migration on unemployment should become more pronounced later this year. That’s because asylum-seekers can’t work for their first three months, and face restrictions afterwards, meaning it could take them some time to work their way into the system to obtain unemployment status.

“As the labor force increases, unemployment will probably edge up modestly” by as much as 200,000 in the second half of 2016 “despite ongoing gains in employment,” according to Schmieding.

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