German Labor Market Takes Breather as Unemployment Inches Higher

(Bloomberg) -- German unemployment unexpectedly inched higher in June, suggesting companies are taking a breather from hiring ahead of the summer holidays.

The number of people out of work in Europe’s largest economy rose by a seasonally adjusted 7,000 to 2.547 million, data from the Federal Labor Agency in Nuremberg showed on Friday. The median estimate in a Bloomberg survey was for a decline of 10,000. The jobless rate was unchanged at 5.7 percent.

A pick-up in manufacturing that is bolstering growth, and confidence among Germany’s businesses at an all-time high, suggest that the increase in joblessness is probably a glitch in a four-year trend of falling unemployment rather than a turning point. The Bundesbank has raised its growth forecasts through 2019, and said that the favorable labor-market situation is a “crucial foundation” for private consumption to maintain its role as pillar of the recovery.

“Employment and companies’ demand for new workers continued to increase strongly,” labor agency head Detlef Scheele said in a statement.

Joblessness rose by about 5,000 in the west Germany and 2,000 in the eastern part of the country. The number of employed people, which is reported with a one-month lag, rose in May and was about 1.5 percent higher than a year ago, the labor agency said.

Even though the labor market is getting tighter, wage growth in Germany remains moderate -- a dilemma the European Central Bank says weighs on inflation. 

Consumer prices in the region’s largest economy rose an annual 1.5 percent in June -- more than economists anticipated but less than the Frankfurt-based institution strives for in the 19-nation bloc. Eurostat will publish euro-area data at 10 a.m. Frankfurt time.