Seasonally adjusted unemployment in Germany dropped to less than 3m in April – for the first time since 1992 – in a reassuring signal of the strength of the domestic labour market only days before the country must open its borders to free labour movement from its eastern neighbours.
Monthly figures published on Thursday by the Federal Labour Office showed that the number of people out of work dropped by a seasonally-adjusted 37,000 to 2.97m. The unemployment rate was unchanged at 7.1 per cent.
The steady improvement in the German labour market has encouraged analysts’ expectations of a revival in domestic demand. But concern over rising inflation, on a European harmonised basis,and wage pressures in Europe’s largest economy could persuade the European Central Bank to continue its bias towards further interest rate rises for the eurozone. Annual inflation hit 2.6 per cent in April, rising from 2.3 per cent in March.
Frank-Jürgen Weise, head of the Nuremberg-based labour office, said the jobless figures were based on strong growth in employment figures, with German exporters “showing a high inclination to hire”. Some of them are now reporting growing difficulties in finding skilled workers to meet the strong export demand in emerging markets.
The steady fall in German unemployment over the past 18 months has tempered trade union fears of “wage dumping” that might follow the opening of its borders to free labour movement on May 1, when European Union workers from central and eastern Europe will be free to seek employment in Germany for the first time.
The federal labour office predicts a maximum labour migration of some 140,000 a year from the eight eastern members that joined the EU in May 2004. Other estimates suggest that an initial surge in job-seekers could reach 800,000 for the first two years of 2011 and 2012
Ursula von der Leyen, labour minister in the German government, said on Thursday that the switch to free labour movement presented Germany with a great opportunity.
“At the moment, the labour market is as absorbent as a sponge,” she added. “The number of vacancies is rising and many firms are looking for skilled labour with increasing urgency.
“Based on the experience of our neighbours who dropped their (labour market) restrictions earlier, it is mainly well-educated, mobile young people who come,” she said. “They will contribute to boosting our country economically and fill part of the skilled labour shortage.”
But she warned that the “unspectacular but solid” improvement in the jobless figures were “no reason for euphoria”.
“Everyone knows the risks,” she said. “We are heavily dependent on the global market, and it remains to be seen if the events in the eurozone, north Africa and the Arab world, and also in Japan, will affect the German economy.”
Dirk Schumacher, senior European economist at Goldman Sachs, said the strength of the German labour market was “good news for consumer spending…The rise in employment and vacancies also shows that companies assess the economic outlook as sufficiently good to add to their production capacities.”
The German jobless figures show a continuing split between rates of 3.9 per cent in Bavaria and 4.2 per cent in Baden-Württemberg, in the prosperous south, compared with 13.2 per cent in Mecklenburg-Vorpommern in the north-east, and 13.9 per cent in Berlin, the capital city.
Throughout the former east Germany, unemployment remains well above the national average.