German Unemployment Rate Falls to Record Low as Job Market Booms

Source: BLOOMBERG

Germany’s unemployment rate unexpectedly fell to a record low in January, in a sign that economic sentiment in Europe’s largest economy is withstanding the tumult in global markets.
The jobless rate fell to 6.2 percent, the lowest level since German reunification, from 6.3 percent, data from the Federal Labor Agency in Nuremberg showed on Tuesday. The number of people out of work declined by a seasonally adjusted 20,000 to 2.73 million. Economists in a Bloomberg survey predicted a drop of 8,000.

The strength of Germany’s labor market augurs resilient domestic demand that should keep underpinning what Economy Minister Sigmar Gabriel said last week was a “good, stable situation” for the country. The economy may be shortly in for another boost as the European Central Bank considers adding to stimulus for the euro area as a whole.
“The good development of the job market has continued at the beginning of the year,” Frank-Juergen Weise, president of the labor agency, said in a statement.
While companies still face downside risks, most notably a slowing Chinese economy that is jolting global financial markets and weighing on global trade, high employment and weak oil prices have boosted consumer spending. An index of German manufacturing activity published on Monday declined to a three-month low, with new orders falling to the weakest level since September.
That keeps the pressure on domestic demand to sustain the economic expansion. Spending is projected to climb 2.3 percent in 2016, compared with an estimated 1.6 percent in 2015, the Economy Ministry said in its annual outlook last week. Export growth, the historic backbone of Germany’s economy, is seen slowing to 3.2 percent from 5.4 percent.
Further stimulus may be ahead, courtesy of the ECB. The Frankfurt-based central bank is reviewing its euro-area monetary policy to see if more easing is need to achieve its inflation goal. Slumping energy costs are preventing consumer-price growth from picking up. That’s spurring concern among officials that low inflation expectations will become entrenched, weighing on wage growth and undermining the region’s recovery.