Germany: Strong labour market data show first tentative signs of weakening - ING

Carsten Brzeski, chief economist at ING, notes that the German unemployment dropped by 72,200 in April (not seasonally adjusted), bringing the total number of unemployed down to 2.229 million, the lowest April reading since reunification.

Key Quotes

“In seasonally-adjusted terms, unemployment dropped by 12,000, keeping the seasonally-adjusted unemployment rate stable at 4.9%. The number of vacancies dropped for the first time since December last year. For those looking for some signs of weakness, this improvement was the weakest April improvement since 2016.”

“Earlier today, stable consumer confidence and an increased willingness to spend provided further evidence that, at least for the time being, the labour market remains a perfect insurance against any recession fears.”

“At the same time, the dichotomy between the export-oriented industry and the domestic-oriented service industry has also reached the labour market. While in the manufacturing industry, recruitment plans turned negative in March, for the first time since July 2016, employment expectations in the service industry remain close to all-time highs. This brings back some memories of text book lessons that the labour market simply reacts with a lag to external changes.”

“While it would be premature to call a complete decoupling of the domestic part from the export-oriented part of the German economy, there are reasons to believe that a slowdown in employment growth is not necessarily a concern.”