While much of Europe is in the grip of a deepening economic crisis, the continent’s most powerful nation appears to serve as an oasis of prosperity.

The unemployment rate in Germany sank to its lowest level in two decades last month, partially boosted by the robust exports of automobiles and machinery, reported the German Federal Labour Agency.

The DAX stock market appears to be cheering the news, having risen about 1.2 percent in mid-day trading.

The jobless rate eased to 6.8 percent from 6.9 percent the prior month -- the lowest level ever witnessed in reunified Germany (and also down from 7.7 percent in 2010).

There are now about 2.8-million unemployed Germans, down from an average of nearly 3-million over all of last year.

By contrast, the jobless rate in Spain is well in excess of 20 percent.

At one point years ago, unemployment in Germany was as high as 12 percent, largely due to depressed economic conditions in the formerly Communist eastern part of the nation.

Stephen Evans, a BBC correspondent in Berlin, noted that now even the East is experiencing a buoyant economic rebirth.

“Now cities like Leipzig [in the East] are rebounding, attracting manufacturing because the wages are lower than those in the West, but also bright start-ups in technology,” he wrote.

“East and West remain divided economically, but the division is narrowing.”

He added that exports to China have helped to boost the payrolls.

“For the first time, more than 40-million Germans -- about half the population -- have jobs,” Evans added.

“Economists warn, though, that growth will slow this year, and that could mean people losing their jobs and a further squeeze on wages. All the same, unemployment at a record low for the last two decades is something most countries would envy, and a sign of the way Germany has rebuilt itself since the Wall came down.”

However, 2012 will likely pose some serious challenges.

The chief of the Labour Agency Frank-Juergen Weise told reporters in Nuremberg: “German unemployment mastered the dual impact of the debt crisis and weakening economic growth in 2011 but these risks remain, accompanying us as we enter the New Year.”

Mario Gruppe, an economist at NordLB in Hanover, told Bloomberg: “Germany won’t be able to avoid an economic cooling down, so there will also be effect on the labor market. But we saw in the last crisis that the German labor market held up astounding well in global competitiveness, so the effects could be negligible.”

Timo Klein, Senior German Economist for IHS Global Insight in Frankfurt, commented since the economic recovery took hold in Germany from mid-2009 onwards, employment gains have stayed ahead of declines in unemployment, revealing an ongoing increase in the labor force.

“However, following a phase until about mid-2011 in which full-time jobs increased more quickly than part-time jobs, the latter have been showing greater momentum again in recent months,” he added.
“This indicates that firms are facing added uncertainty due to the Eurozone debt crisis and are getting more reluctant to hire new people on a full-time basis.”

Looking ahead, Klein believes the main risks to Germany’s job picture continue to be those related to the Eurozone debt crisis and associated banking sector concerns.

“Overall, given persisting domestic strength, Germany’s economy is expected to avoid any full-blown recession unless there is a collapse in financial markets in the form of widespread European bank failures and/or a disorderly sovereign default of a Eurozone country,” he noted.