Snow-resistant? German unemployment increased by a non-seasonally adjusted 25,900 in February. Officially, 3.64 million Germans are currently unemployed. In seasonally-adjusted terms, however, unemployment increased by only 7,000, lifting the seasonally-adjusted unemployment rate to 8.2%, from a revised 8.1% in January. At the same time, the numbers of vacancies dropped for the first time since September, by 4,000.
Today’s labour market report includes good and bad news. Of course, it did not come as a surprise that German unemployment would continue to increase again and it was also not the last time. However, the fact that even with an exceptionally strong winter, seasonally-adjusted unemployment only increased marginally is good news. While the rest of the economy seems to suffer from the harsh winter weather, the labour market remains snow-resistant.
Looking ahead, things will probably get worse before they get better and unemployment is still bound to increase somewhat. However, the worsening should be short-lived. Leading indicators, historical evidence and recent wage settlements with job guarantees all point to a stabilisation of the labour market around the summer. Recent German surveys showed that recruitment plans are improving gradually. Initially, the stabilisation of the labour market should be marked by a pure unwinding of short-work schemes with only limited impact on private consumption. However, given very sluggish consumption in the second half of last year, no boost can be too small.
The labour market should continue to be the bright spot of the German economy and tender positive surprises should not be excluded. The horror scenarios of exploding unemployment remained what they were: scenarios.