Germany reaps labour reform rewards

continued to reap the benefits of labour market reforms and a global recovery.
The Federal Labour Agency said the unadjusted number of unemployed had fallen below three million in Europe’s biggest economy, with a drop of 118 000 bringing the politically symbolic figure to 2 960 000.
“The labour market reforms undertaken in 2003 to 2005 continue to make strong positive impact on employment,” Berenberg Bank economist Christian Schulz noted.
When adjusted for seasonal and calendar effects the decline was a much more modest 8 000 however, compared with an average analyst forecast decline of 30 000 compiled by Dow Jones Newswires.
In April, the adjusted jobless rate stood at 7,1 percent in Germany, and 7,3 percent on a non-adjusted basis, but in May, both calculations came up with the same figure of 7,0 percent.
Earlier in the day, the national statistics office said retail sales had gained 0,6 percent in April, following a revised slump of 2,7 percent in March.
The new data “again illustrated the German economy’s main dilemma: while the labour market remains the showcase of the recovery, private consumption is only slowly getting off the ground”, ING senior economist Carsten Brzeski said.
German manufacturers have well-stocked order books and are investing more, and the demand for labour should remain strong, analysts say.
IHS Global Insight economist Timo Klein said that “overall, the economic recovery appears to have enough domestic stamina to lead to continually declining unemployment during 2011-12”.
Yet “looking ahead, it is obvious that German consumers will not engage in a spending spree”, Brzeski said, though he also noted that “the fundamentals for decent consumption boom in Germany have hardly been better since reunification” in late 1990. – AFP.