The number of German unemployed fell in November to its lowest level since 1992, but a 3-1/2 year labour market boom is running out of steam as recession bites in Europe's biggest economy. Adjusted for seasonal variations, the German jobless total fell by 10,000 month-on-month to an unemployment rate of 7.5 percent, the Federal Labour Office said on Thursday.
However, the head of the Office said the labour market would soon feel the impact of the economic downturn, meaning Chancellor Angela Merkel is likely to fight her campaign for re-election next year with unemployment back on the rise. "We reckon that by the start of 2009 at the latest, the jobless total will start to increase again," said Fabienne Riefer, an economist at Postbank in Bonn.
The adjusted fall, which exceeded a forecast for a decline of 4,000, took the jobless total to 3.150 million, the lowest level since December 1992, according to Bundesbank data. The headline unadjusted jobless figure, which receives more prominence in German media, fell some 8,000 to 2.988 million, lowering the rate to 7.1 percent, a post-reunification low.
However, bad news about the German economy has peppered the headlines in recent weeks, with a closely-watched gauge of business sentiment falling to a near 16-year low in November. Earlier this week, the head of Deutsche Bahn, Europe's biggest rail firm, said the financial crisis and accompanying economic downturn had hit its freight business hard. "We're getting close to an abyss and we don't know how deep it's going to be," Chief Executive Hartmut Mehdorn said.
After presiding over a job market upturn that has slashed unemployment by more than a third since 2005, Labour Office chief Frank-Juergen Weise made a much more cautious assessment of trends than he has in recent months. "The signs are increasing that the economic downturn will soon reach the labour market," though it was in better shape to weather a downturn than it had been previously, he said.
"Unemployment won't rise at the same rate as the economy deteriorates," he said, noting that on demographic grounds - an ageing population and a low birth rate - there would be 130,000 fewer people looking for jobs in Germany next year. By this time next year, the jobless ranks in Germany may have swelled by around 300,000, Weise said. Merkel - who is already under pressure from some members of her own conservative party to do more to tackle the economic crisis - is seeking re-election in September and the jobs boom has underpinned her popularity.
Analysts say unemployment could rise faster than in previous downturns because much of the labour market upswing was fuelled by firms taking on more part-time and temporary staff. Eckart Tuchtfeld, an economist at Commerzbank, said the market had probably seen the last of the positive jobs data as the impact of the recession in Germany hits home in the coming months.
"The pace of the current downturn, strengthened in all expectation by the effects of the financial crisis, suggests a strong reaction," he said. "We therefore anticipate a significant rise in unemployment of around 700,000 in the course of 2009."