German Unemployment Falls as Industry Outlook Starts to Brighten

(Bloomberg) --

German unemployment unexpectedly declined at the start of 2020 as businesses ramped up operations after a yearlong industry slump.

The number of people out of work dropped by 2,000 in January to 2.277 million, defying economist predictions for an increase. The jobless rate held at 5%, near a record low.

Europe’s largest economy is starting to regain ground after a downturn in manufacturing derailed growth in 2019. Policy makers have been hoping that rising optimism among companies would lead to a broader recovery. While business expectations took a surprising turn for the worse in January, the decline was driven by dwindling prospects in services and construction, rather than in industry.

“The economy’s weak phase continues to leave its mark, but overall the labor market proved itself robust at the start of the year,” said Labor Agency head Detlef Scheele.

While still weak, manufacturing seems to have left behind the worst of its crisis. Surveys of purchasing managers last week showed that factory activity is still shrinking, though at a slower pace. Easing trade tensions between the U.S. and China are further bolstering prospects.

Germany’s government raised its growth projection for this year to 1.1% and sees momentum accelerating further in 2021. Even though that’s an improvement from 2019, when output expanded at the weakest pace in six years, Economy Minister Peter Altmaier said Wednesday that rates at those levels are hardly satisfactory.

The government, which sees unemployment holding steady at 5% this year, highlighted a spending plan allocating more than 160 billion euros ($176 billion) through 2023 in areas such as infrastructure and transportation to keep the economy competitive as it turns more digital and climate-aware, and its population ages.

©2020 Bloomberg L.P.