German unemployment dropped by a non-seasonally adjusted 1,900 in November, bringing the number of unemployed down to the lowest level since November last year. Currently, 2.751 million people are without a job. However, today’s improvement is the weakest November improvement since 2004. In seasonally-adjusted terms, unemployment increased slightly, leaving the seasonally-adjusted unemployment rate unchanged at 6.9%.
Supported by the strong labour market, private consumption has become an important driver of German growth. Since the beginning of 2010, private consumption has grown by an average 0.3% QoQ. Of course, this is nothing compared with the shopping frenzy experienced in other countries in the past.
Looking ahead, however, it is doubtful whether private consumption can really take over the baton as main growth driver for the German economy. Employment expectations in the manufacturing sector have entered negative territory, most open vacancies are temporary jobs and several companies have reintroduced short-time work schemes.
German unemployment looks set to increase further. This increase, however, should only be a very mild increase, mainly located in the export industry. Companies operating in domestic sectors, as eg the construction sector and health services, still have a strong demand for labour. The lack of qualified workers and employees continues to be a pressing issue in some sectors, indicating that the labour market could enter a two-speeded period.
Today’s numbers provide further evidence that the labour market is gradually losing steam. However, the lack of qualified employees and still strong labour demand in domestic sectors should make the current slowdown a very gradual one. In fact, if the external environment improves quickly, the slowdown could not only turn out to be gradual but also very short-lived.