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German unemployment continued to drop in November, falling for a fifth month, as the economy recovers from the worst recession. The decline was unexpected as economists had forecast an increase in the figure.
The seasonally adjusted number of unemployed in Germany fell 7,000 month-on-month to 3.42 million in November, the Federal Labor Agency said Tuesday. Economists had forecast an increase of 5,000. In October, unemployment decreased 26,000. The jobless rate fell to 8.1% in November from 8.2% recorded in October.
"The strong labor market performance is impressive but it is no new German job wonder, yet," ING senior economist Carsten Brzeski said. "The German government's decision to extend short-term work schemes until the end of 2010 should again help limiting the inevitable increase in unemployment next year."
The labor agency said the decline in the number of people out of job was a result of a change in the calculation method implemented earlier this year. Without this change, unemployed would have risen by around 10,000, the labor office said.
Earlier in the day, the Federal Statistical Office said the seasonally adjusted unemployment rate under the ILO definition was 7.5% in October, up from 7.1% recorded in the same month of the previous year. The number of unemployed amounted to a seasonally adjusted 3.25 million in October, up 190,000 persons or 6.1% over the previous year.
Looking ahead, unemployment is likely to increase until 2010, the ING economist noted. However, with the improving economic outlook, gradually filling order books and increasing demand for new labor, the threat from unemployment has reduced.
"The downside of the short-term schemes probably is that even with an ongoing economic recovery employment will hardly grow in the next two years. Alleviating the pain is not the same as curing the sickness," Brzeski said.
German households continue to remain worried about joblessness. Consumer confidence for December unexpectedly dropped for a second month as economic and income expectations dropped on an expected rise in unemployment. The Nuremberg-based GfK Group said households expect a marked rise in unemployment in the coming months. According to German Council of Economic Experts forecasts, unemployment will be running at an average rate of 4 million in 2010, which would be 600,000 more than in this year.
The Federal Statistical Office also announced today that the retail sales in real terms increased a seasonally and calender adjusted 0.5% month-on-month in October, compared to the 0.2% decline in the preceding month. Economists had expected an increase of 0.4%.
"Although rising interest and business income from, tax reliefs and the low inflation rate will support private consumption in the first half of 2010, the situation on the labor market is likely to deteriorate noticeably in the winter half year and will outweigh the positive effects," Commerzbank analyst Simon Junker said. "Private consumption should continue to fall until mid next year."
German Finance Minister Wolfgang Schaeuble said on November 20 that an expected rise in unemployment is a major threat to Germany's recovery. He noted that it would be premature to say that Germany has overcome the crisis and hence, it would be too early to remove stimulus measures now.
The biggest Eurozone economy expanded 0.7% in the third quarter after expanding 0.4% in the second quarter. The economy recovered in the second quarter after contracting in the past four quarters.
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