German Unemployment Falls to Record Low Despite Economic Blip

(Bloomberg) -- Europe’s largest economy showed signs it’s still resilient as unemployment fell to a record low despite weaker business sentiment and activity across the region.

Germany’s jobless rate unexpectedly fell to 5 percent in November from 5.1 percent, and the number of people out of work slid by 16,000 compared with an estimated decline of 10,000 in a Bloomberg survey. The report backs the Bundesbank’s view that the economy is rebounding from a summer contraction, and will bolster the European Central Bank’s belief that wage pressures are mounting.

Key Insights

• The data support the narrative that German domestic demand will continue to buoy momentum even after the auto industry faced setbacks and exporters took a hit amid trade uncertainty.
• Germany’s Bundesbank foresees a “fairly strong” expansion in the final three months of 2018 after a contraction in the third quarter, with private consumption as a major driver. Still, business confidence soured in November and a purchasing managers’ index signaled private-sector growth is the weakest in almost four years.
• Unemployment dropped by 9,000 in west Germany and by 7,000 in the eastern part

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• The global economy headed into the final stretch of 2018 in weakened shape, and the OECD said tax cuts and a spending splurge would be needed in case of a sharp downturn because central banks have nothing left in the tank.
• Earlier in the day, neighboring Switzerland reported a surprise economic 0.2 percent contraction in the third quarter, in part because of a drag on trade.
• Sweden also registered a surprise contraction on the back of falling household consumption, the first such drop since the second quarter of 2013
• The ECB, which meets to set monetary policy on Dec. 13, has acknowledged external risks to the euro-area economy such as trade protectionism, but says domestic demand is resilient and capacity constraints are starting to push up prices
• German inflation data are due later on Thursday. The rate of consumer-price growth is forecast to fall to 2.3 percent from 2.4 percent. The euro area reports inflation on Friday

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