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German Unemployment Rises Slightly

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There has been no change in this month’s headline unemployment rate in Germany, however a slight uptick has been detected in the numbers of those out of work. Seasonally adjusted the key Unemployment level remained at 6.7% during the month of May as anticipated. The Unemployment Change number however detected an increase of 24k in the numbers out of work, this erases a fall in this number of 25k the previous month, there was slight disappointment in the market that had been anticipating a further fall of approximately 15k this month.

The strength of the German economy is evident in the steadiness of the 6.7% unemployment rate, this is as close to full employment as can be expected in this environment and it also represents the lowest rate that Germany has experienced in over 20 years. The German authorities are uniquely tolerant of grey market employment and actively promote ‘mini jobs’, part time work maxing out at an untaxed €450 and 20 hours per month. Although this skews short term employment data it has a positive long term effect on the economy through the provision of flexibility to the millions of small and medium enterprises in the country.

There have been some concerns recently of a hiccup in the German growth story, yesterday’s business confidence data showed a fall of in the previously positive sentiment among business leaders. It would be natural to couple today’s unemployment numbers with the business sentiment index and arrive at the conclusion that the German recovery is beginning to falter. The reality however, at lease from the jobs growth point of view, is that much of the employment fall off is temporary and is related to the large tourism industry which has suffered this year due to unexpected weather pattern of a snowless winter and a late cold spell disrupting the industry, particularly in the south of the country.

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