Carsten Brzeski's blog

German labour market remains solid as a rock

A spring revival of the labour market continues, with the unemployment rate unchanged at an all-time low.

German unemployment dropped by a non-seasonally adjusted 93,500 in April, bringing the total number of unemployed to 2.569 million; the lowest number since December last year. In seasonally-adjusted terms, unemployment dropped by 15,000, leaving the seasonally-adjusted unemployment rate unchanged at 5.8%.

The German labour market remains solid as a rock. In fact, survey indicators suggest that the positive trend will continue. Recruitment plans have increased again over the last twelve months and the Federal Labour Agency’s official index for labour demand has been on a continuous upward trend since early 2015, reaching new all-time-highs almost every month. Against this backdrop, the labour market will remain an important growth driver for the entire economy. Interestingly, the influx of refugees has so far hardly appeared in the labour market data; a sign that asylum applications and integration takes longer than previously anticipated.

Nevertheless, despite the good-news-show, there are some underlying weaknesses in the German labour market. With more than seven million people, the low-wage sector is still huge and has hardly shrunk, despite the strong economic performance over the last years. Also, the number of long-time unemployed as well as the share of part-time employment remains high. While the share of part-time employment was less than 18% in 1991, it has increased to almost 40% of total employment in 2016. Finally, the full-time work participation rate of women remains clearly below the European average.

All in all, the German labour market remains the showcase of the economic recovery. However, at the risk of complaining on a high comfort level, there is still ample room for improvement.