The German labour market is still improving. In August, seasonally-adjusted unemployment dropped by 8,000, keeping the unemployment rate unchanged at 7.0%. Due to the summer vacation, the unadjusted number of unemployed increased by 5,400.
The German labour market remains strong but it would be naïve to think that the labour market could be totally immune against the debt crisis and the economic slowdown. Remember that the labour market is a lagging not leading indicator. That said, there are already first signs that the German labour market has been caught by the general normalisation trend of the entire economy. Recruitment plans, although still positive, have been downscaled since March, pointing to a bottoming out of a dropping unemployment rate towards the end of the year.
As for the entire economy, fundamentals seem too sound to fear a new crisis on the German labour market any time soon. With employment at historical highs, favourable demographics and an economy that is slowing but not contracting, the labour market should remain growth-supportive.
Source: ING BANK