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German unemployment falls

01/09/2010, by Propfund Germany

German unemployment fell for the 13th month in July as companies from Infineon Technologies AG to Deutsche Lufthansa AG benefit from the strengthening global economy. The number of people out of work declined a seasonally adjusted 20,000 to 3.21 million, the Federal Labor Agency in Nuremberg said today. That's the lowest since November 2008. Unemployment was forecast to fall 20,000, according to the median of 34 estimates in a Bloomberg News survey. The adjusted jobless rate declined to 7.6 percent.

The drop in joblessness comes on the same day that German companies from Siemens AG to BASF SE reported earnings that outstripped estimates, adding to data for July showing services and manufacturing industries accelerated as business confidence surged to a three-year high. That all points to Germany's export-driven economy gathering pace as improving global demand outweighs spending cuts by European states trying to lower debt. "As the world economy recovers and foreign demand grows, Germany's export industry is among the winners," said Stefan Hardege, an economist at the Berlin-based DIHK chamber of industry and commerce, which represents 3.6 million companies. "We've seen a favorable development in the labor market and we assume this will continue." The euro climbed 0.6 percent to $1.3073 as of 10:40 a.m. in Berlin. German 10-year bund yields were little changed at 2.74 percent.

Munich-based Siemens, Europe's largest engineering company, raised its full-year profit outlook today after quarterly income rose 40 percent, beating analysts' estimates. BASF, the world's biggest chemical company, cited a rebound in demand for second- quarter profit that topped estimates. Cologne-based Lufthansa, the second-biggest airline in Europe, tripled its quarterly operating profit on a recovery in demand for travel and freight transport. Infineon Technologies AG, based in Neubiberg, raised its full-year forecast yesterday, with Chief Executive Officer Peter Bauer saying that Europe's second-largest chipmaker is "executing extremely well in the current up-cycle." The Ifo business-confidence index unexpectedly jumped to 106.2 this month from 101.8 in June, the biggest monthly increase since records for a reunified Germany began in 1990. Economy Minister Rainer Bruederle sees the economy growing 2 percent this year, outstripping the government's 1.4 percent projection, Focus magazine reported on July 24.

"Consumers are optimistic because of falling unemployment and are spending more, creating a virtuous circle," said Peter Leonhardt, an economist at Dekabank in Frankfurt. "We should finally get some good news again from consumer spending in the second quarter." Leonhardt said he was "gobsmacked" by the strength of the labor market. GfK AG's monthly index of household confidence will rise to a nine-month high in August, the Nuremberg-based market-research company said July 27. "The pace of expansion noticeably improved in spring," the Bundesbank said in its monthly report on July 19. The "remarkable" improvement in the labor market bodes well for "a gradual stabilization of private consumption."

Shortages of skilled workers are starting to reappear. Labor demand rose in July, led by temporary-work companies, retailers, construction and the food and drinks industry, the labor agency said in a report yesterday. Daimler AG, the world's second-largest maker of luxury cars, has hired 1,800 temporary workers and added Saturday shifts at some plants. Germany's VDI association of engineers said the net shortage of engineers in areas including machinery and vehicles, electrical installations and construction rose for a fifth month in June to 35,400. It's a "problem for some sectors at the moment," Hardege said. "It's a continuation of a development that was there before the crisis" that's set to "intensify." According to Organization for Economic Cooperation and Development data, Germany's jobless rate was 7 percent in May. The equivalent rate in France was 9.9 percent and the U.S. rate was 9.7 percent.

(Source: Propfund Germany, www.propfund.com)