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Germany reported an unexpected decline in joblessness this month, easing concerns that the economy is sliding into recession.
The number of people out of work decreased by 10,000 to 2.276 million in September, the first drop in five months. The unemployment rate was at 5%, near a record low.
Below the surface though, cracks are starting to appear. Vacancies declined, a sign of caution among companies about hiring, and demand for new workers eased. The decline in joblessness this month was registered exclusively among those receiving basic security benefits -- a category that includes the long-term unemployed and low earners. Unemployment claims, a gauge more closely reflecting economic momentum -- continued to increase.
After six years of an almost continuous decline in joblessness, the labor market in Europe's largest economy is being hit by a slump in exports amid global trade and political tensions. The manufacturing sector is already in recession and the far-larger services sector could follow if rising jobless damages consumer spending.
The improvement in September might still ease some of those concerns. In the euro area, joblessness fell surprisingly in August, taking the rate to the lowest level in more than a decade.
The German government, which has bolstered its political support by running a budget surplus for years, has signaled it's willing to step in with fiscal support if needed but has so far said it sees no reason to act.
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The German economy shrank 0.1% in the second quarter and the Bundesbank is among institutions expecting another decline in the current three months, meeting the typical definition of a recession.
Factory activity shrank at the fastest pace in a decade in September, and blue-chip companies including Henkel and Continental have cut their profit expectations for the year.
The European Central Bank agreed this month to step up monetary stimulus for the euro zone. At the same time, President Mario Draghi said its “high time” for fiscal policy to play its part and nations with space to act -- such as Germany -- should do so.
--With assistance from Kristian Siedenburg, Harumi Ichikura and Piotr Skolimowski.
To contact the reporter on this story: Yuko Takeo in Frankfurt at ytakeo2@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Jana Randow
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