Connect to share and comment

German labour market resilient in face of slowdown

PlacardEnlarge
(Globalpost/GlobalPost)

Germany's labour market remains robust in face of the slowing economy, even if unemployment rose slightly in April as companies become more cautious about hiring, data showed on Tuesday.

Indeed, the resilience of the German economy, Europe's biggest, looks set to push consumer confidence up to its highest levels in early six years, a survey found.

On the face of it, unemployment in Germany fell this month, with the jobless rate declining to 7.1 percent from 7.3 percent in March and the jobless total down by 77,500 at 3.02 million, according to monthly data compiled by the federal labour agency.

But unemployment usually declines at this time of year as the warmer spring weather allows industries such as the construction sector to take on more people.

When adjusted for such seasonal factors, the jobless total rose by 4,000 to 2.938 million and the jobless rate was steady at 6.9 percent.

Despite a weakening of economic momentum, as seen in a raft of recent day, "the labour market is fundamentally sound," insisted labour agency chief Frank-Juergen Weise.

At current levels, German unemployment is indeed close to the record low since unification.

But companies hiring plans for the next three months "have moderated as companies are more cautious," said Newedge Strategy analyst Annalisa Piazza.

Commerzbank economist Ralph Solveen believed slowing growth was "only a minor burden on the labour market."

The picture "is not particularly sombre. After all, employment has continued to rise, too," Solveen said.

IHS Global Insight economist Timo Klein agreed.

"Overall, labour market conditions continue to be much healthier in Germany than in most other countries in Europe, and the dampening effect of the eurozone debt crisis must not be overstated," he said.

Holger Schmieding at Berenberg Bank said that with the German economy stagnating in the second half of 2012 and rebounding only modestly in early 2013, "the long decline in unemployment has stalled."

However, looking at the employment numbers, "the strong trend in the labour market, wage gains of around 2.7 percent and the slowdown in inflation to a mere 1.2 percent "bode well for consumer demand," Schmieding argued.

That was seen in consumer confidence which is expected to rise to its highest level in nearly six years in May, according to the monthly consumer climate index calculated by market research group GfK.

A 0.5-percent drop in retail sales in March is unlikely to dampen such confidence, said Schmieding.

"With tensions in the eurozone fading somewhat, we look for car sales to recover some of the losses in coming months. The rise in German GfK consumer confidence to a 5-year high of 6.2 reported earlier today fits our overall view," the expert said.

"A gradual strengthening of German consumer demand will be one of the key factors to put an end to the current mild recession and return then overall eurozone economy back to modest growth this summer," he concluded.

GfK itself said the escalation of the debt of the debt crisis in Cyprus "does not appear to have had a lasting effect on consumer sentiment, which remains robust."

Both income expectations and consumers' willingness to spend are still rising from already high levels.

"It seems that consumers do not feel their own personal economic situation is in jeopardy thanks to stable jobless numbers and pay increases," GfK explained.

The headline consumer confidence reading is based on responses from about 2,000 households regarding their expectations about pay and the economy as a whole in the coming months, as well as their willingness to spend money.

spm/arp

GfK

http://www.globalpost.com/dispatch/news/afp/130430/german-labour-market-resilient-face-slowdown