U.S. News

Germany's Jobless Rate Higher in July


The ranks of the unemployed in Germany ticked nominally higher in July, rising to 8.9% from 8.8% in June, the government said Tuesday, as workers took an expected pause at the peak of the country's vacation season.

The number of unemployed people rose to 3.715 million in July from 3.687 million in June, but was down from 3.812 million in May in the country of 82 million, according to figures released by the state jobs agency.

Adjusted for seasonal swings, such as summer hires and vacation staffing, the number of people out of work fell by 45,000 to 3.77 million, pushing the adjusted jobless rate to 9% from 9.1%, its lowest ebb in 14 years.

"The German job machine took the expected breather in July due to the peak in the vacation season. On a non-seasonally adjusted basis, it was the first rise since the start of 2007," said Andreas Rees, chief German economist for UniCredit Markets & Investment Banking.

But he said the slight rise was nothing to worry about.

"The upswing on the labor market is intact. This is indicated by two things. First, the number adjusted for seasonal pattern posted the sixteenth decline in a row," Rees said. "Second, companies' hiring plans indicate a further improvement in the months ahead. Hence, the labor market is on vacation, but will be back in August and September."

Germany was plagued for several years by near-zero economic growth and double-digit unemployment.

The jobless rate peaked at 12.6% in February 2005, when the number of Germans out of work reached a post-World War II record of 5.216 million.

Since then, the economy has been buoyed by increased exports and by consumers' increased willingness to spend. Business, investor and consumer confidence surveys are all soaring.

Fueled by demand abroad for its automobiles, computer chips and home appliances, German companies have been on a hiring binge to fill demand for such orders by expanding capacity at production plants.

German Government Forecasting Economic Growth

The German government is forecasting economic growth of 2.3% this year, while the Paris-based Organization for Economic Cooperation and Development is forecasting 2.8% growth, matching the actual figure recorded in 2006.

With such activity unlikely to taper off, analysts have said that Germany's unemployment rate is expected to fall gradually in the coming months as well.

"As before, gains in employment continue to stem largely from normal jobs paying social security contributions and not from job-creating measures of the Labor Agency," said Timo Klein, senior economist for Germany for London-based Global Insight.

He said the jobless rate in Germany is predicted to hover at just around 9% the rest of the year and "decline further to 8.1% in 2008."

The unemployment results came out the same day that data showed that German retail sales rose less than expected in June, rising 0.8% from June 2006 and up 0.7% in May, according to the Federal Statistics Office.

A drop in food, non-specialized retail and mail-order sales damped growth, the agency said, causing the results to miss the growth of 1.5% that analysts polled by Dow Jones Newswires had forecast.