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German Unemployment Falls to Record Low Despite Economic Blip

Germany’s jobless rate unexpectedly fell to 5% in November from 5.1 percent, and the number of people out of work slid 16,000.

German Unemployment Falls to Record Low Despite Economic Blip
Dariusz Foerster, machine operator at Burger Group, works on the gear wheel assembly line inside the Burger Group gearmaker and automobile component factory in Schonach, Germany. (Photographer: Alex Kraus/Bloomberg)

(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.

German Unemployment Falls to Record Low Despite Economic Blip

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

--With assistance from Catarina Saraiva, Harumi Ichikura and Kristian Siedenburg.

To contact the reporters on this story: Carolynn Look in Frankfurt at clook4@bloomberg.net;Oliver Sachgau in Munich at osachgau@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow

©2018 Bloomberg L.P.