German Unemployment May 2008

German unemployment unexpectedly rose in May for the first time in more than two years as record oil prices and the euro's appreciation weighed on exports. The figures however do need to be treated with caution, since computer glitches at the labour office, the reclassification of some categories of unemployed and the simple fact that Easter was in March and not April have all, to some extent, been playing around with the data.

The number of people out of work, adjusted for seasonal swings, rose 4,000 from April to 3.31 million (although the unadjusted number was still down a bit - see chart below) according to the Nuremberg-based Federal Labor Agency today. Up to May unemployment had fallen every month since January 2006.

With oil close to a record and the euro's 16 percent increase against the dollar in the past year making exports of goods like cars less competitive, companies may well be becoming more reluctant to hire workers. The European Central Bank has indicated its unwillingness to lower interest rates while inflation and money supply continue to surge strongly in the 15 country eurozone.

Exports unexpectedly fell for a second month in March as a global slowdown and the rising euro weighed on orders, according to the Federal Statistics Office in their monthly report.



In Europe, Germany's main export market, service and manufacturing industries expanded at the slowest pace in five years in May, according to the PMI flash estimates.

Data from NTC Economics gave a preliminary estimate for the Eurozone services PMI which slumped to 50.6 in May from 52.0 in April, way below forecasts for a much more moderate fall to 51.8. The level equals January's four and a half year low and takes the index closer to the 50 level below which the index would be indicating a contraction in activity. The equivalent index for manufacturing dropped to 50.5 from 50.7, slightly above forecasts, which were expecting a slightly weaker reading of 50.4, but still marking the lowest reading since August 2005.

The flash Purchasing Managers Index for Germany's service sector fell to 53.7 in May from 54.9 in April, while in the manufacturing sector activity dipped to 53.5 from 53.6 a month earlier. So basically we have the impression that things are slowing all round.

However, Frank Weise, head of the Federal Labour Agency which released the employment figures, warned that this months drop in the rate of employment creation “should not be interpreted as the first sign of a slowdown in the labour market.”

The agency said statistical effects and changes in the law also played their part. The seasonally-corrected figures, it said, were being distorted by unseasonably warm weather during the winter while changes in the legal status of jobseekers over 58 alone accounted for a 10,000 increase in the number of unemployed.

The mild weather, in particular, meant fewer jobs had been lost during the winter than in previous years, resulting in a lower reduction in unemployment during the spring season, the agency said. The statistical agency also pointed to employment figures – whose publication lags one month behind the jobless data – showing an 54,000 increase in job creations in April.


As reported by the Federal Statistical Office on the basis of first calculations for April 2008, the number of persons in employment whose place of residence was in Germany was 40.08 million. That was an increase by 650,000 persons (+1.6%) on April 2007. Compared with March 2008, the number of persons in employment rose by 153,000 (+0.4%) in April 2008.

So the positive trend in overall employment creation which has existed in Germany over the last two years certainly continued into April. It is true however that in April the increase in employment was somewhat smaller against the previous year than in earlier months (both in March and February 2008 the rate of increase had been + 1.8% compared with the same month one year earlier). One explanation being offered for this is that particularly favourable employment figures had been recorded for the earlier months (and this is, incidentally, also reflected in the particularly favourable GDP numbers). The mild winter on the one hand and an increased utilisation of the seasonal short-time working allowance on the other will have contributed to this result. The allowance is available only during the period 1 December to 31 March.

In April 2008, the number of persons in employment in Germany was 40.25 million after seasonal adjustment, that is after elimination of the typical seasonal variations. That was a seasonally adjusted increase by 27,000 (+0.1%) on March 2008.

Based on the labour force survey the Federal statistics Office reported a seasonally adjusted 3.19 million unemployed for April 2008. That figure, which is a provisional estimate, was calculated according to the concept of the International Labour Organization (ILO). Compared with the same month a year earlier (April 2007), the number of unemployed was down by 480,000 persons or 13.1%. The seasonally adjusted unemployment rate – which is harmonised across the EU and measured as the share of unemployed in the total labour force – amounted to 7.4% in Germany and was thus considerably below the level of the corresponding month of the previous year (8.5%).

The raw, unadjusted figures showed a 131,000-strong drop in unemployment in May – smaller than the fall observed in May last year - down to a total of 3.28m jobseekers. Internationally comparable figures using International Labour Organisation methodology put the number of jobseekers at 3.39m in April and the unemployment rate at 7.8 per cent.