German Jobless Falls for Fourth Month as Growth Picks Up

German unemployment fell for a fourth month in March as companies became more confident in the health of Europe’s largest economy.

The number of people out of work dropped by a seasonally-adjusted 12,000 to 2.9 million, after falling a revised 15,000 the previous month, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 10,000, according to the median of 31 estimates in a Bloomberg News survey. The adjusted jobless rate was unchanged at 6.7 percent after being revised down in February to the lowest in at least two decades.

Falling unemployment in Germany is supporting domestic consumption just as a recovery in the rest of the euro area, the country’s biggest trading partner, bolsters exports. The Bundesbank says the German economy probably strengthened “substantially” in the first quarter, after an expansion of 0.4 percent in the three months through December that beat economists’ estimates.

“The underlying trend is a gradual decline in German unemployment over the course of the year,” said Holger Schmieding, chief economist at Berenberg Bank in London. “However, unemployment cannot fall much further because the people who are still unemployed do not have the skills needed to find jobs.”

Hiring Plans

The number of people out of work fell by 2,000 in west Germany and 10,000 in the eastern part of the country, the labor agency said.

Germany’s DAX stock index advanced 0.4 percent to 9,589 at 11:19 a.m. Frankfurt time. The yield on the country’s two-year government bond was little changed at 0.159 percent.

Germany’s jobless numbers highlight how it’s faring better than the rest of the 18-nation euro area. Figures from the European Union’s statistics office in Luxembourg today showed unemployment in the currency bloc at 11.9 percent in February, marking an only gradual decline from the record 12.1 percent reached last year. Germany’s rate using Eurostat’s calculation was 5.1 percent. Italy’s climbed to an all-time high of 13 percent.

Hannover, Germany-based Continental AG, Europe’s second-biggest maker of car parts, said last month that it’ll hire about 7,000 people in 2014, mostly in growth markets. Bayer AG, the country’s largest pharmaceuticals company, said it’ll create 500 new jobs at its sites in Wuppertal and Leverkusen.

Labor Strikes

The tighter labor market is boosting employment costs. Negotiated wages will rise 3 percent this year and a national minimum wage in 2015 will increase the upward pressure, according to a report by Barclays Plc.

“The current wage negotiations for public sector employees have been tough and have already led to several warning strikes,” Thomas Harjes and Francois Cabau, economists at Barclays, said in the report. “Since public sector wage agreements often serve as a floor for the private sector, there is a risk that wage costs rise somewhat faster in 2015 than what we have currently pencilled in.”

Workers from hospitals to airlines have gone on strike to demand higher pay and benefits. Deutsche Lufthansa AG, Europe’s second-largest carrier, said this week that a stoppage by pilots would cost tens of millions of euros as it canceled thousands of flights. The company described the action as among the most severe in its history.

Purchasing managers indexes released today by Markit Economics Ltd. showed growth in manufacturing activity slowed in Germany and the euro area last month.

European Central Bank policy makers meet on April 3 in Frankfurt to set interest rates for the currency bloc. Consumer prices rose 0.5 percent in March, the slowest pace in more than four years, prompting speculation that the institution will add more stimulus. The central bank has pledged to return inflation to its goal of just under 2 percent.

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