By Palash R. Ghosh: Subscribe to Palash's RSS feed
July 29, 2010 12:11 PM EDT
Unemployment in Germany fell for the 13th straight month in July, as the jobless rate edged down to 7.6 percent – a 20-month low – from 7.7 percent.
According to the Nuremberg-based Federal Labor Agency, the number of jobless people declined (on a seasonally-adjusted basis) by 20,000 to 3.21 million -- the lowest level since November 2008.
The jobs data coincided with better-than-expected earnings for big German manufacturers like engineering giant Siemens AG and chemical-maker BASF, suggesting the nation's export-driven economy is responding well to increased global demand, despite an environment of government spending cuts all over Europe.
“As the world economy recovers and foreign demand grows, Germany’s export industry is among the winners,” said Stefan Hardege, an economist at the Berlin-based DIHK chamber of industry and commerce.
“We’ve seen a favorable development in the labor market and we assume this will continue.”
Follow us
Yesterday's surprising jump in the Ifo business-confidence index for June adds to buoyant spirits in Germany's financial community.
The drop in German unemployment will add to hopes that the impressive recovery in exports and industry might soon spread to the consumer sector, said Jennifer McKeown, senior European economist at Capital Economics in London. “The German labor market has been surprisingly resilient thanks to the Government’s Kurzarbeit subsidies, which encourage firms to reduce working hours instead of cutting headcounts. On the face of it at least, the ongoing recovery should support household incomes, perhaps prompting a pick-up in domestic spending that would provide a lifeline for the euro-zone’s beleaguered periphery by supporting their exports.”
McKeown tempers his comments with some caution, however.
“Kurzarbeit subsidies last for only two years, so there is a risk of a renewed increase in unemployment as they expire; wage growth has yet to respond fully to earlier increases in unemployment and will fall further; and German fiscal consolidation will begin next year, offsetting at least part of any boost to households’ incomes,” she explained.
“The labor market has been holding up much better than feared so far helped by the use of short work schemes, but this has failed to lift consumption, so far,” said Natascha Gewaltig, an analyst at Action Economics.
McKeown adds that while Germany will continue to perform well in the near term, “we hold out little hope of a strong domestic revival.”
One of the interesting aspects of the German unemployment picture lies with the pervasive disparity between the West and the formerly Communist East.
“Unemployment in the East continues to be around double that in the West,” noted Gewaltig.
“Lower productivity makes the East a less attractive company location despite somewhat lower wages. Also, the east German states have to compete with lower wages in the new EU countries. The disparities in unemployment rates is a cause for social tension and frictions between the former East and the West.”
To report problems or to leave feedback about this article, e-mail:
To contact the editor, e-mail:
Are Record-Low Mortgage Rates Hurting The US Housing Market?
Airbus Smells Good Business In Wider Plane Seats For Bigger Americans
French, Germany Consumer Confidence Holding Up -- A Dangerous Sign of Euro Zone Crisis Fatigue?
US Stocks - Time To 'Sell In May And Go Away'?
Investors Love Rio: Why Foreign Companies Are Buying Into Brazil's Real EconomyWe value your privacy. Your email address will not be shared.
