More good news. German unemployment dropped by a non-seasonally adjusted 9,300 in February, bringing the total number of unemployed down to 2.911 million, the best February reading since German reunification. In seasonally-adjusted terms, unemployment decreased by 10,000, leaving the seasonally-adjusted unemployment rate unchanged at 6.2%. It seems that the relatively mild winter weather has supported the labour market. Interestingly, there does not seem to any noticeable impact from the refugee crisis on the labour market, yet.
At first glance, the German labour market is still the showcase model of the economy and a guarantee for solid domestic demand. Employment is moving from one record high to the next one, vacancies are currently also at all-time highs and the combination of higher wages and low inflation provides an excellent prerequisite for strong consumption in the months ahead.
At second glance, however, some small cracks in the mask of invulnerability have started to show. Since last summer, the number of short-term work schemes (yes, Germany’s big answer to the 2008 crisis) has started to increase and stands at the highest level since November 2013, although the absolute level is still low. Moreover, employment expectations in the manufacturing industry have been dropping since last summer. A clear sign that the industry is facing cooler external headwinds. As long as this weakness is balanced by strong activity in the service sector, where recruitment plans are still positive and close to all-time highs, there is no need to get overly concerned.
All in all, the German labour market will remain an important growth driver this year and beyond. The challenges ahead, however, are much bigger than the relatively dull and constant data from today’s report suggest.