The success story continues. German unemployment dropped by a non-seasonally adjusted 72,200 in June, bringing the total number of unemployed to 2.865 million, the lowest level since December 2012. In seasonally-adjusted terms, unemployment dropped by 12,000, the first monthly drop since February. The seasonally-adjusted unemployment rate remained unchanged from a downwardly revised 6.8% in May.
As expected, the spring revival of the German labour market came with a delay. The high number of public holidays and the cold weather in May had blurred last month’s data. Today’s numbers show that it was far too premature to start singing Swan Songs on the labour market.
In fact, the German labour market remains the show case example for successful labour market reforms. The June revival was actually the strongest June revival since 2010. It seems as if earlier reforms are still paying off and that the German labour market needs less economic growth than in the past to create jobs. Up to the early 2000s, the German economy required growth of at least 1 ½ % to create new jobs. In recent years, GDP growth rates of less than 1% were sufficient for job creation. This bodes well for the near-term outlook, indicating that despite an expected GDP growth rate of only roughly 0.5% this year, the labour market should remain stable. At the Eurozone level, it is obvious that the success of its own structural reforms will further encourage the German government to continue hammering on structural reforms.
With yesterday’s strong consumer confidence and today’s good labour market report, domestic demand should continue being an important growth driver this year.