(Bloomberg) -- German unemployment declined in October as companies added workers to meet surging demand, underpinning already strong growth momentum in Europe’s largest economy.
The number of people out of work fell by a seasonally adjusted 11,000 to 2.495 million, the Federal Labor Agency in Nuremberg said on Thursday. That beat the median estimate in a Bloomberg survey for a drop of 10,000. The jobless rate held at record low of 5.6 percent.
Germany is heading for its best growth performance in six years, with consumption benefiting from a strengthening labor market and companies more optimistic than ever that the global recovery will fuel demand. The most recent Purchasing Managers’ Index showed job creation in manufacturing was among the fastest in the survey’s history.
“The very good development in the labor market continues,” labor agency head Detlef Scheele said in a statement. “Dynamic employment growth continues and company demand for new employees is increasing.”
The Institute for Employment Research predicts unemployment will decrease by some 60,000 people in 2018, Scheele told reporters in Nuremberg.
In October, joblessness fell by about 7,000 in west Germany and by 4,000 in the eastern part of the country.
“The German labor market remains an impressive engine for the entire economy,” said Carsten Brzeski, chief economist at ING-Diba AG in Frankfurt. It “also illustrates why significant wage increases are still way off.”
The number of people in low-wage jobs remains close to an all-time high, and trade unions are focusing on the quality of work in addition to negotiating higher wages, Brzeski wrote in a note to clients.
Sluggish wage growth -- not just in Germany but also in the 19-nation euro area -- is one reason why the European Central Bank is advocating prudence in scaling back ultra-expansionary monetary stimulus. Policy makers decided last week to extend asset purchases through September at half the current monthly pace to fuel inflation, which remains far below the institution’s goal even as the economy is headed for its best annual performance in a decade.
The Bundesbank predicts that the German economy may have maintained its growth pace of the first half of the year in the third quarter. First data will be published on Nov. 14. Economists in a separate survey project an expansion of 0.5 percent.
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