German Unemployment Drops More Than Expected as Economy Recovers

(Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

Germany’s jobs market recovery accelerated in July as businesses rebuilt their workforce to cope with continuously strengthening demand.

Unemployment in Europe’s largest economy fell by 91,000 in July, more than economists expected, pushing down the jobless rate to 5.7%. Manufacturers are reporting full order books and services are bouncing back following the end of coronavirus lockdowns.

The International Monetary Fund this week raised its 2022 growth forecast for Germany to 4.1%, arguing that momentum will pick up later in the year.

While output is already on the verge of making up the ground lost during the pandemic, putting Germany ahead of most other countries in the region, the labor market has some way to go. There are still about 309,000 more people unemployed than at the start of last year, and some 1.5 million workers continue to receive state wage support.

The Bundesbank predicts unemployment will decline strongly in the coming months. Daimler AG is planning to hire around 1,000 software developers for its Sindelfingen campus and another 2,000 at tech hubs including Berlin.

Yet with Covid-19 infections rising again and carmakers in particular facing supply bottlenecks, risks to the economic outlook have increased. Inflation pressures are also on the rise as companies increasingly pass on higher costs to customers.

A report on German consumer prices is due at 2 p.m. Frankfurt time.

©2021 Bloomberg L.P.