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More Jobs to Go Around

DW staff / AFP (sp)May 31, 2007

The current economic boom in Germany enabled Europe's biggest economy to hold its jobless rate at the lowest level for six years this month, data showed on Thursday.

https://p.dw.com/p/Amk1
Germany's booming economy has created more jobsImage: AP

The sunny outlook for the German economy will ensure that the positive trend remains intact in the months to come, analysts said.

According to raw, unadjusted data published by the Federal Labor Agency in Nuremberg, the German jobless rate fell by 0.4 percentage point to 9.1 percent in May, the lowest level since October 2001.

Bauarbeiter auf der Baustelle
Mild weather is beneficial for the construction industryImage: AP

The overall jobless total declined by 161,000 to 3.806 million, the lowest number of dole-claimers in Germany since November 2001, the figures showed.

Unemployment usually falls in the spring thanks to the warmer weather, which is favorable to sectors such as the construction industry.

Labor market helped by warm weather

Adjusted for such seasonal effects, the jobless rate held steady at 9.2 percent, the lowest level since May 2001, while the adjusted jobless total rose slightly by 3,000 to 3.855 million.

The small upward blip was unexpected -- analysts had been penciling in a decline in the adjusted jobless total of around 12,000 this month -- but was largely due to the unusually mild winter, which had caused fewer companies to lay off workers during the preceding months, as well as the heavy rain seen this month, analysts said.

"The economic upturn in Germany is continuing apace and is helping to stimulate the labor market," insisted labor office chief Frank Weise.

Weise suggested that the unadjusted jobless total could fall below 3.5 million by the autumn, with the annual average total for the whole of 2007 likely to come out at 3.8-3.9 million.

Analysts were similarly unfazed by the slight rise in the adjusted May jobless total this month.

"Surveys of hiring intentions remain consistent with solid employment growth so the May figures may have been adversely affected by special factors such as the rainy weather, which has probably hurt activity in retail sales and construction," said BNP Paribas economist, Caroline Newhouse-Cohen.

"All in all, we assume that there is still some scope for further employment growth and decreasing unemployment over the coming months," the analyst said.

All the right indicators in place

Indeed, key confidence surveys such as the ZEW and widely-watched Ifo indices suggested that Germany, among all the euro-area economies, was likely to prove most resilient to the strong euro, rising interest rates and the slowdown in growth in the United States, Newhouse-Cohen said.

Arbeitslose Deutschland Bundesagentur für Arbeit in Frankfurt
Lines are getting shorter at German labor officesImage: AP

Investor confidence, as measured by the monthly ZEW index, hit an 11-month high in May, while the Ifo business climate index held steady just a fraction off its all-time high.

DekaBank economist Peter Leonhardt similarly believed that the upturn on the German labor market "remains intact. Companies' order books are full and confidence that the economy will continue to prosper is balm for the wounds of the labor market."

Bank of America economist Holger Schmieding said that the jobless data so far this year had likely been distorted by the unusually mild weather and a new seasonal program to keep people off the dole in the winter.

Nevertheless, "the underlying trend in the labor market remains solid," Schmieding said.

"Taking the last six months together, unemployment has fallen by a monthly average of 59,000. We consider this the underlying trend, which should soon be visible in the headline data again," he said.

IXIS-CIB economist Sylvain Broyer predicted that the jobless figures may move sideways for a few months.

"But we expect the unemployment rate to decline in trend until mid-2008 as the recovery proves to be robust. Indeed, the jobless rate could reach 8.8 percent by the end of this year," Broyer suggested.