German Unemployment Unexpectedly Gains in Summer Lull

Thursday, 29 Aug 2013 06:10 AM

 

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German unemployment unexpectedly gained in August for the first time in three months in a sign that Europe’s biggest economy is slowing after it surged in the second quarter.

The number of people out of work increased by a seasonally adjusted 7,000 to 2.95 million, the Nuremberg-based Federal Labor Agency said. Economists predicted a decline by 5,000, according to the median of 25 estimates in a Bloomberg News survey. The adjusted jobless rate stayed at 6.8 percent, near a two-decade low.

Some companies are still cutting jobs as countries in the euro-region’s periphery struggle to emerge from recession. The labor market is a point of contention among German politicians as they campaign ahead of Sept. 22 elections, with Chancellor Angela Merkel opposing challenger Peer Steinbrueck’s pledge to raise taxes and introduce a flat-rate minimum wage.

“This is not a big disappointment,” said Heinrich Bayer an economist at Deutsche Postbank AG in Bonn. “The number of unemployed over recent months has been largely stable. If the economic recovery continues, the labor market should improve again in the coming months.”

The euro was down 0.6 percent at $1.3266 at 11:21 a.m. in Frankfurt, little changed from before the data was released. The benchmark DAX stock index was up 0.5 percent at 8,194.59. The yield on German 10-year bunds was little changed at 1.87 percent.

Growth Stabilization

Germany’s gross domestic product expanded 0.7 percent in the three months through June, after stagnating in the first quarter as a colder-than-usual winter curbed output. Growth will “normalize and stabilize” in the remainder of 2013, the Bundesbank said on Aug. 19. The Frankfurt-based central bank predicted in June that GDP will increase 0.3 percent this year and 1.5 percent in 2014.

While the 17-nation euro region, Germany’s largest trading partner, emerged from six quarters of contraction in the second quarter with growth of 0.3 percent, Spain and Italy remained in a two-year long recession. Unemployment in the currency bloc probably remained at a record 12.1 percent in July, according to the median estimate in a Bloomberg News survey before Eurostat releases the data at 11 a.m. tomorrow.

Hiring, Firing

ThyssenKrupp AG, Germany’s biggest steelmaker, plans to cut 3,000 administrative jobs over three years and this month said it’ll shut two plants at Neuwied. Salzgitter AG, the rival steelmaker that predicts a loss for 2013 amid waning demand in Europe, will eliminate more than 1,500 positions.

At the same time, General Motors Co.’s Opel division is seeking about 300 new engineers for its international technical development center in Ruesselsheim, close to Frankfurt. Hamburger Hafen & Logistik AG, the handler of about 80 percent of containers at Hamburg’s port, will create about 100 jobs from September, board member Heinz Brandt told Hamburger Abendblatt in an interview published on Aug. 15.

“Unemployment rose during the summer break in August,” Frank-Juergen Weise, head of the German labor agency, said in a statement today. “Overall, the German job market is stable.”

Merkel, whose Christian Democrats lead Steinbrueck’s Social Democrats by 15 percentage points in the latest Emnid poll, has turned her campaign focus to the economy four weeks before parliamentary elections. During a rally in the eastern town of Wernigerode last week, she warned that plans by the SPD to raise taxes would upend Germany’s robust labor market.

Minimum Wage

“It’s the wrong thing to do during a time now where there are more jobs and our economy is largely in balance,” she said.

Steinbrueck said today in Berlin that his priorities for the first 100 days in office if he wins include a minimum wage of 8.50 euros ($11.28) an hour, equal pay for men and women, same pay for the same job for temporary agency workers and permanent staff, and tax increases for higher earners.

Germany and France hold the key to rebalancing the European economy and must follow through on promised reforms, according to European Union Economic and Monetary Affairs Commissioner Olli Rehn.

“In a nutshell, this calls for competitiveness-supporting economic reforms to the labor market, business environment conditions and the pension system in France, and for structural measures to further reinforce domestic demand in Germany,” Rehn said today in prepared remarks for a speech in Alpbach, Austria.

Business Spending

Elsewhere, Australian business investment rose last quarter as stronger mining spending outweighed a decline in manufacturing. Capital spending gained 4 percent from the first quarter, when it fell a revised 4.1 percent, the Bureau of Statistics said in Sydney today. That compares with the median forecast for no change in a Bloomberg News survey of 20 economists.

Reserve Bank of Australia Governor Glenn Stevens and his board slashed borrowing costs by 2.25 percentage points over the past 22 months to 2.5 percent to foster a transition to industries including residential construction as resource investment wanes. Prime Minister Kevin Rudd, who has called the end of Australia’s China-led mining boom, has set an election for Sept. 7 framed around economic management.

The Philippine economy expanded above 7 percent for a fourth straight quarter, defying a regional slowdown to remain one of Asia’s best performers. Gross domestic product rose 7.5 percent in the three months through June from a year earlier, compared with a 7.7 percent gain in the previous quarter, the National Statistical Coordination Board said in Manila today. Growth matched China’s for a second quarter.

© Copyright 2014 Bloomberg News. All rights reserved.

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