Less magic but still sound. German unemployment increased by a non-seasonally adjusted 298,400 in January, bringing the number of unemployed to the highest level since March 2011. Currently, 3.138 million people are without a job. Despite the harsh winter weather, this January drop was the smallest January decrease since 2008. In seasonally-adjusted terms, unemployment even dropped, lowering the seasonally-adjusted unemployment rate to 6.8%.
During the last months of 2012, the German job miracle took a little breather. Cyclical support ebbed away and unemployment started to gradually pick up. This trend, however, masked the fact that the labour market had entered a two-speeded period. In the export industries, unemployment started to increase and companies revised their recruitment plans downwards significantly. At the same time, companies operating in domestic sectors, as eg the construction sector and health services, still had a strong demand for labour. The lack of qualified workers and employees in these sectors was and is a pressing issue.
Looking ahead, the two-speeded labour market could become a multi-speeded labour market. While demand for labour in the service industry has cooled off somewhat, recruitment plans in the construction sector have increased to the highest level in more than a year. At the same time, the employment outlook in the manufacturing and retail sector has started to clear up. On balance and taking these different speeds together, it looks as if total unemployment should remain relatively stable throughout 2013.
Today’s numbers confirm that the German job miracle has lost some of its magic. However, even without being miraculous, the labour market should remain growth-supportive.