Germany’s Unemployment Rises in December
Germany left 2019 in a weakened state, as it saw the unemployment rate grew more than expected in December. This suggests the impact of a weaker manufacturing activity is taking a toll on Europe’s largest economy.
Data released by the Federal Labor Office on Friday revealed that the jobless count was up by 8,000 to 2.279 million in seasonally adjusted terms. This data compared to economists’ forecast of a 2,000 increase.
The latest figure was the highest since May, although it was steady at 5%. This ended slightly higher than the record low of 4.9% generated earlier this year.
The country’s recent economic data have shown mixed figures so far.
Business confidence in Germany improved for the third month last month. However, the latest purchasing manager’s index (PMI) figure signalled that weakness in the manufacturing segment is worsening.
Germany Manufacturing Slump Weighs on the Labor Market
The downturn in the manufacturing industry last year has become a key factor for the shortcomings in the country’s labor market, which has been the pillar of a consumption-led growth cycle.
Manufacturing PMI, which represents about a fifth of the German economy, dropped to 43.7 in December from November’s five-month high 44.1.
The reading marked the 12th straight month of the country’s manufacturing PMI hitting below the 50.0 thresholds, separating growth from contraction.
German factories also experienced their worst recession in a decade last year. The US-China trade spat, which has struck the world economy, and Brexit raised exporters’ worries. Automakers faced difficulty with the transition to electric vehicles.
That slump led the European Central Bank (ECB) to tighten monetary policy and required governments with fiscal space, like Germany, to spend more.
The weak economic cycle is leaving visible marks on the labour market, according to the head of the Labour Office Detlef Scheele.
Looking ahead, economists see a slight rise in the number of people out of work in 2020. However, a robust services sector could expect more Germans becoming a part of the labour market.
Labour market expert Martin Mueller said the employment trends should weaken. However, as long as it is predictable, this year should set a new employment record, and real wages should climb.
Mueller estimated employment to rise by 200,000 to 45.4 million. And the jobless rate would expand by 50,000, bringing unemployment growth at 5.1%.
The forecast is valid, barring severe setbacks for the economy, according to Mueller.
The risks for the economy are considerable. They include the trade conflict between the US and China as well as the risk of a hard Brexit, he added.
