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Gauging the Blowback of Germany’s Unemployment Rate

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The unemployment rate decline

Germany’s unemployment rate was lower at 3.8% in December 2016, as compared to the pre-crisis level of 11.3% in 2003. The OECD (Organization for Economic Co-operation and Development) average unemployment rate was about 8% in 2015. This reduction in the unemployment rate has helped reduce the need for social spending but has increased tax revenues.

At the same time, improvements in public finance were supported by the “debt brake” rule implemented in 2009. The overall fall in unemployment led to a surge in confidence in German financial markets (EWG) (DXGE) in 2016.

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Unemployment rate in 2016

The unemployment rate by the end of 2016 was 3.8%, as compared to 4.3% one year previously. Germany’s refugee inflow also fell sharply in 2016. Most of the refugees are expected to join the labor force over the next two years, after the completion of the nation’s asylum procedures and training.

Meanwhile, German jobless claims fell to 9.6% in December 2016. Germany also posted an increase in GDP per capita above its the pre-crisis level, reaching 1.9% in 2016.

Strong activity in employment-intensive sectors like retail trade and restaurants boosted employment and wage growth while maintaining the unemployment rate at historic lows. The companies in these sectors include Metro AG (MTTRY), Tesco (TSCDY), J Sainsbury (JSAIY), and Morrison Supermarkets (MRWSY).

In the next and final part of this series, we’ll look at the manufacturing trend in Germany.

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