German unemployment falls

September 30, 2008
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, FRANKFURT, September 30 – German unemployment fell in September to a level last seen more than 15 years ago, official data showed on Tuesday, though analysts expected it to begin rising again next year.

The benchmark unemployment rate in Europe\’s biggest economy declined to 7.4 percent from 7.6 percent in August, according to figures published by the national labour agency, even as business activity diminished rapidly.

At the end of the month, the biggest European economy counted a total of 3.081 million unemployed workers, the agency said.

When adjusted for seasonal factors, the number of unemployed people decreased by 29,000 following a drop of 39,000 in August, the labour agency said.

The pace in September was roughly in line with the average of 28,000 over the past six months. But because the German economy is slowing sharply, the steady improvement in unemployment was thought to be nearing an end.

On Saturday, Economy Minister Michael Glos warned the government would have to "markedly revise downward" its growth forecast for 2009 owing to the world financial crisis.

The 2009 estimate is currently at 1.2 percent, but Glos did not say what the new forecast would be.

Commenting Tuesday on the unemployment data, Commerzbank analyst Eckart Tuchtfeld said: "It can only be a matter of time before it too is hit by the economic slowdown."

The September unemployment rate typically declines as companies take on new workers or rehire those who were laid off during the summer holidays.

The data showed "that Germany is one of the few eurozone economies where labour market conditions are still improving," Capital Economics economist Jennifer McKeown noted.

"This is a rare piece of good news for German consumers, although admittedly survey measures of hiring intentions point to a slowdown in employment growth to come," McKeown added.

Despite falling unemployment levels and rising wages, consumers have seen their purchasing power eroded by inflation that was fueled by higher costs for energy and food.

Consumption has been affected as a result and has failed to provide significant support to the German economy.

UniCredit Markets economist Alexander Koch noted that the adjusted number of unemployed workers marked the 40th decline in the past 42 months, and the lowest level since January 1993.

Koch added however that "as the labour market is traditionally a lagging economic indicator, an end to the downward trend in unemployment is in the cards."

Global Insight senior economist Timo Klein felt unemployment was "likely to revert to an upward tendency during 2009."

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