German Unemployment Continues To Fall In August

German unemployment fell by a slightly larger-than-expected 40,000 to 3.2 million in August, according to data from the federal labor agency last week. This followed a fall of 20,000 in July, and many analysts had been expecting a more modest seasonally-adjusted drop somewhere in the region of 10,000.



Commenting on the data, labour agency chief Frank-Juergen Weise said the positive tendency in the labour market seemed to be continuing and that the developing weakness in the German economy had yet to have any discernible impact on jobs. Indeed, the August fall came despite other indicators pointing to slowing economic growth with two key surveys released earlier this week showing both business and consumer confidence falling.

In the more politically sensitive seasonally-unadjusted terms, the numbers out of work fell by 14,000 to 3.196 million which brought the jobless rate down to 7.6 percent from 7.5 percent in July. The August seasonally-unadjusted figure was 510,000less than in the same month last year.




The German economy, Europe's largest, shrank in the second quarter as companies cut back on investment, suggesting that payrolls may follow. German business confidence fell to a 36-month low in August. Still, the job market may not deteriorate as fast. The Labor Agency's IAB institute recorded 1.13 million job openings in the second quarter, 15,000 fewer than in the previous three-month period. Situations vacant will decline ``over the medium term,'' the IAB said on Aug. 11.

The labor market is a notoriously lagging indicator, and normally lags about six months behind other early warning economic indicators such as industrial production, but in the context of an ageing and about to decline labour force, it may well be that there are more factors at work this time round. In any event it will be well worth following closely how the German labour market responds to what may well be a looming economic recession.

According to the latest comparable data of the Organization of Economic Cooperation and Development, Germany's jobless rate was 7.3 percent in June. France, Germany's main trading partner, reported 7.5 percent unemployment compared with 4.1 percent in Japan and 5.5 percent in the U.S. The OECD average that month was 5.8 percent.



In a separate report the Federal Statistical Office stated that the number of persons in employment in July was 40.16 million. That was an increase of 562,000 persons (or 1.4%) over July 2007. Compared with June 2008, the number of persons in employment decreased by 42,000 (–0.1%) in July.

The statistics office are at pains to point out that a slight decline in the number of persons in employment between June and July is the rule, and offers no indication in and of itself that the long running positive trend in the German employment market has been reversed. This situation is underlined by the seasonally adjusted figures: in July 2008, the number of persons in employment in Germany was 40.25 million after seasonal adjustment, that was a seasonally adjusted increase of 33,000 persons (+0.1%) over June 2008.