Unemployment in Europe’s largest economy registered its third-sharpest fall since the early 1990s in July, taking economists by surprise as Germany’s economic recovery was finally shaking up its long-depressed labour market.

“The figures are considerably better than expected, and that’s across the board,” said Elga Bartsch, economist at Morgan Stanley, after the Federal Labour Office said on Tuesday seasonally adjusted unemployment had dropped by 84,000 since June to 10.6 per cent of the active population.