Germany: Good news from labour market data - ING

German unemployment dropped by 74,400 in April (not seasonally adjusted), bringing the total number of unemployed to 2.384 million; the lowest number since the all-time low of November last year, points out Carsten Brzeski, Chief Economist at ING.

Key Quotes

“In seasonally-adjusted terms, unemployment dropped by 7,000, leaving the seasonally-adjusted unemployment rate unchanged at 5.3%. The number of vacancies reached another all-time high of 784 000. More impressive evidence that the German labour market remains solid as a rock. With a bit of fishing for any signs of levelling off, the only negative aspect of the report is the fact that it was the weakest April improvement in the labour market since 2012.”

“Yes, nominal wages have and should continue to increase at higher rates than the rest of the Eurozone, but recent wage settlements still look moderate compared with the economic situation. While employment in Germany has grown by some 8% since 2010, labour costs have increased by some 2.2% on an annual average. This compares with 3% employment growth in the entire Eurozone and 1.6% average wage growth.”

“In our view, these numbers and the broader case of the German labour market nicely show that structural factors are limiting upward pressure on wages despite low unemployment. We think these structural factors include increased globaliastion, automation and digitalisation and all three are increasing competition and putting jobs above pay rises.”

“All in all, the German labour market remains an impressive engine for the entire economy and brings some positive news after a period of rather disappointing macro data. At the same time, however, the German labour market also suggests that significant wage increases for the entire Eurozone could still be way off.”