German Jobless Unexpectedly Up in April as Crisis Flared

German unemployment unexpectedly rose in April as the debt crisis in the euro area constrained growth and hiring in Europe’s biggest economy.

The number of people out of work increased a seasonally adjusted 19,000 to 2.87 million, the Federal Labor Agency in Nuremberg said today. Economists forecast a decline of 10,000, the median of 34 estimates in a Bloomberg News survey shows. The adjusted jobless rate was unchanged at 6.8 percent, still a two- decade low, after the agency revised up figures for February and March.
“The labor market has entered a period of stabilization at a high level,” said Carsten Brzeski, an economist at ING Group in Brussels. While “the economic tailwind from the last two years is clearly fading away,” it is “not yet a cause for concern” and so far underscores that the labor market is an indicator that lags behind economic developments.

German unemployment has been the biggest advertisement for Chancellor Angela Merkel’s prescription to quell the debt crisis with budget cuts and labor-market changes as part of an economic overhaul. Separate European figures published by the Luxembourg- based statistics agency Eurostat today showed euro-region unemployment rose to 10.9 percent in March, the highest in almost 15 years and almost double Germany’s rate of 5.6 percent.

Even so, following the German labor agency revisions, joblessness has now increased in three of the past seven months after declining for 27 straight months.

The euro extended its decline after the jobless data were published, weakening for a third day against the dollar. It was down 0.6 percent at $1.3154 as of 12:40 p.m. in Berlin.
‘Hanging On’

The labor agency ascribed the rise in part to accounting changes as a result of the day of the unemployment count falling within the Easter vacation. It also said that companies were bracing for the crisis to have an impact.

“What we’re noticing is that companies are hesitant to take that very last step in their hiring intentions,” Raimund Becker, one of three agency board members, told reporters in Nuremberg. “They want to hire but are hanging on and that’s being caused by the crisis. The uncertainty is there.”

Declining unemployment has until now helped gird the German economy against the crisis by bolstering household spending as export growth slows. Exports will climb 3 percent this year compared with 8.2 percent last year as demand in primary European markets wanes, the government forecast on April 25.
Manufacturing Slump

Euro-area manufacturing shrank for a ninth month in April and more than initially estimated, a separate report showed today, adding to signs the economic slump is worsening.

The German economy will expand 0.7 percent this year after 3 percent in 2011, the Economy Ministry said last week, keeping its forecast from January intact. The economy of the 17-nation currency area will contract 0.3 percent, according to European Commission forecasts. Germany sells 40 percent of its exports in the euro region and 60 percent to the European Union as a whole.

“Consolidation and bold structural reforms in the labor market pay off,” Economy Minister Philipp Roesler said April 25. “This is an important message to our partners in Europe.”

German business and investor confidence indicators have meanwhile beaten forecasts every month this year. The Ifo business confidence gauge rose to a 9-month high in April and an investor confidence index published by the ZEW Center for European Economic Research rose for a fifth straight month.

Production in Germany’s electrical sector may expand 5 percent this year, outpacing pre-crisis levels of growth in 2007 and 2008, the ZVEI industry lobby group said on April 23. China will import about 12 billion euros ($15.9 billion) of goods this year from ZVEI members, the group said.
New Jobs

German companies from builders to information technology firms aim to boost hiring. Germany’s ZDB building trades group will create about 16,000 construction jobs this year as orders rise, the group forecast on April 25. IT federation BITKOM said on April 4 that demand for technology linked to smart phones, tablets and cloud computing will help create 6,000 new jobs in Germany in 2012.

Demand from the U.S. and China will lead to Volkswagen AG (VOW)’s Audi unit creating about 2,000 jobs this year at its Ingolstadt and Neckarsulm plants, the company said on April 9. That’s 800 jobs more than previously announced.

Moderate wage claims that helped the economy climb out of recession in 2009 are being abandoned in sectors from banks to engineering and public services, helping support private consumption. The Ver.di union won a 6.5 percent wage increase last month for about 2 million public-sector workers. The raise matches the wage demand of IG Metall, Europe’s biggest union.

Rising wages “could increase private consumption, which would help the employment market,” Frank-Juergen Weise, labor agency chief, said in Nuremberg.

While the unemployment data showed a “set-back” in April, “we believe that the overall positive employment trend in Germany is still intact,” said Constantin Wirschke, a Frankfurt-based economist at Natixis. “We continue to expect improvement throughout the year.”