German Unemployment Declined Before Britain’s Shock Leave Vote

  • Number of jobless fell by 6,000 vs estimated drop of 5,000
  • Unemployment rate unchanged at record low of 6.1 percent

German unemployment extended its decline in June, signaling economic growth remained robust before Britons unexpectedly voted to exit the European Union.

The number of people out of work fell by a seasonally adjusted 6,000 to 2.69 million, data from the Federal Labor Agency in Nuremberg showed on Thursday. The median estimate in a Bloomberg survey was for a drop of 5,000. The jobless rate remained unchanged at a record low of 6.1 percent.

German companies shrugged off the risk of the U.K. quitting the EU before a June 23 referendum, with business confidence rising to the highest level since November and private-sector growth accelerating to the fastest pace this year. While the economy probably slowed significantly in the second quarter as momentum in construction and manufacturing waned, expansion will pick up in the remainder of the year, the Bundesbank said before the Brexit vote.

“The labor market continues to develop positively,” Frank-Juergen Weise, president of the labor agency, said in a statement, “Unemployment declined again and employment subject to social security rose strongly. Demand for labor continues to be strong.”

Unemployment dropped by 2,000 in western Germany and declined by 4,000 in the eastern part of the country, the report showed.

Brexit Impact

Germany, along with France and Italy, are among the countries likely to be less affected than the EU average by Britain’s decision to leave, according to the International Monetary Fund. More than 60 percent of German manufacturers surveyed by the Ifo institute before the referendum said they don’t expect a Brexit to have any impact on their business, even as Europe’s largest economy counts the U.K. as the third-biggest destination for its exports.

Following the vote, German Chancellor Angela Merkel said the EU remains one of the biggest economic global powers and is “strong enough” to withstand the shock.

German optimism is not shared universally. European Central Bank President Mario Draghi told European leaders on Tuesday that he leans toward more pessimistic forecasts of how much the 19-nation economy will suffer. Growth could be as much as 0.5 percentage point weaker than previously estimated over the course of the next three years, he said.

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