German Labor Market Continues Recovery Amid Omicron Threat

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German joblessness continued to fall in December before the country tightened restrictions to ward off a wave of infections sparked by the omicron variant. 

Unemployment in Europe's largest economy fell by 23,000, beating economists' forecast for a drop of 15,000. The jobless rate slid to 5.2%. 

“The labor market developed well toward the end of the year,” said Federal Labor Agency chief Detlef Scheele. “The pandemic is fueling uncertainties: demand for short-time work has risen sharply.”

After a strong rebound over the summer, German businesses have been hampered by supply bottlenecks and higher infection numbers in recent months. The outbreak may have pushed the economy into a contraction in the final quarter, as it left activity in some services sectors severely curtailed, the Bundesbank has said. 

German factories already suffered from supply problems for much of last year, delaying the economic recovery and helping to push price growth to the fastest level in decades. Inflation reached 6% in November, though new figures this week may indicate that overall price pressure may be easing. 

After weeks of declines, German infection numbers have started to tick higher again. While the increase has been less dramatic than the surges in countries like France and Britain, authorities are bracing for a spike soon. 

The new government led by Chancellor Olaf Scholz tightened restrictions in late December, especially for those who haven't been vaccinated, in anticipation of the more contagious omicron variant. It's also weighing measures to prevent shortages in critical services such as hospitals, care homes and the police. 

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