German unemployment dropped by a non-seasonally adjusted 82,000 in March, bringing the number of unemployment down to close to 3 million again. In seasonally-adjusted terms, unemployment dropped by 18,000, bringing the seasonally-adjusted unemployment rate down to 6.7%, a new all-time low.
The German labour remains rather resilient to the soft patch of the economy at the end of last year. The mild March weather and almost unshattered business optimism seem be the most important drivers behind today’s drop in unemployment. The resilience of the German labour market bodes well for private consumption in the first half of the year.
Even if the soft patch has not (yet) reached the labour market, the economic tailwind from the last two years is clearly fading away. Looking ahead, the labour market should soon enter a period of stabilisation but not stagnation. Recruitment plans have become a bit more cautious but are still positive. Moreover, the vacancy index, BA-X, is still close to its all-time high from January and anecdotal evidence of a lack of qualified workers is increasing. However, as the business cycle impact is weakening, structural measures would be required to bring unemployment further down significantly. Practice what you preach?