German unemployment inches up in June as recession bites

FRANKFURT  -Unemployment unexpectedly rose in Germany in June, official data showed Friday, in the latest sign of weakness in Europe’s biggest economy.

The joblessness rate inched up to 5.7 percent after staying stable at 5.6 percent since March, seasonally adjusted figures from the BA federal labor agency showed.

Analysts surveyed by FactSet had expected the rate to remain unchanged.

Germany was “feeling the effects of the more difficult economic conditions on the labor market,” said BA chief Andrea Nahles in a statement.

In absolute terms, less representative of underlying trends but more closely followed in public debate, the number of people out of work climbed by around 11,000 month-on-month, to 2.55 million.

Even without taking into account the arrival of job-seeking Ukrainian refugees, Germany’s unemployment rate would have risen this month, the agency added.

Germany fell into a technical recession at the start of the year, following two consecutive quarters of contraction, as inflation fuelled by surging energy costs and higher interest rates took their toll.

German economy enters recession

Consumers have continued to rein in their spending in recent months, while demand for corporate and household lending has plunged as the European Central Bank’s rate hikes make borrowing more expensive.

Leading economic institutes now expect the German economy to shrink by 0.2 to 0.4 percent in 2023.

As a result of the gloomier outlook in Europe’s industrial powerhouse, “many employers are looking a little less desperately for skilled workers”, said KfW chief economist Fritzi Koehler-Geib.

Should job security become a growing concern for workers, it could take some of the pressure off wage demands, said ING bank economist Carsten Brzeski.

ECB officials have repeatedly expressed concern about higher wages driving inflation, as workers in many countries push for pay hikes to compensate for the increased cost of living.

“A slight weakening of the labour market… could help dampen wage pressures,” Brzeski told AFP.