The German economy is the largest within the Eurozone bloc and the wider EU and is often described as the powerhouse of Europe. Whilst unemployment across the EU is very uneven, the German economy has managed to create strong demand for workers.
Seasonally adjusted data from Germany’s Federal Statistics Office (FSO) shows that unemployment eased to 6.6% in October (revised down from 6.7%) and has remained at that level in November, according to preliminary data. Some 14000 people found work in November, reducing the number actively seeking employment in Germany to 2.9 million. Whilst this figure remains enormous, the level of unemployment in the nation has dipped to a level not seen since 1993.
German unemployment compares very favourably with the Eurozone average which has been stuck at the 11.5% level for several months now. To confuse everybody, Eurostat which produces statistical data for the EU uses a different mechanism to determine unemployment than the FSO. According to Eurostat, German unemployment stands at 4.9% - less than half of the French level of 10.1%. The highest level of unemployment remains in Greece and Spain where 25.9 and 24% of the workforce respectively is seeking a job.
Inflation in Germany has also dipped to its lowest level for almost five years to stand at 0.5% which will fuel further concerns about potential deflation within the Eurozone and stoke speculation that the ECB will have to engage in addition stimulus measures. Certainly, low inflation in the Eurozone will make any increase in ECB interest rates less likely since “tighter” monetary supply is a tool used to rein-in inflation.
The buoyant job market in Germany is driving a degree of wage growth which, coupled with low inflation, is helping to keep consumer spending relatively healthy.