Is the slump in German industry now reaching the labour market? It is well known that the labour market is a lagging indicator that reacts late to developments that have already begun in the past. Industry in Germany has been weakening since the beginning of 2018. The downturn is dynamic as the Markit Purchasing Managers’ Index for German commercial businesses shows:
Despite the weakness most companies usually hesitate until they decide not to hire new staff or to hire fewer staff than planned. Or even to lay them off. The problem has to become more or less painful before such measures can be taken. The labour market is therefore a lagging indicator. But now the pain seems to be big enough – we are probably on the verge of a turnaround on the German labour market!
The first sign of this is the surprising rise of the number of unemployed persons by 60,000 (a minus of 5000 was expected):
This means that the unemployment rate in Germany is rising for the first time since November 2013:
The Federal Employment Agency writes about this:
“The labour market is beginning to feel the effects of the economic slowdown. Employment under social insurance continues to rise but at present not as strongly. Demand for new employees is at a high level but is becoming noticeably weaker. Seasonally adjusted unemployment and underemployment rose sharply in May from a low level. The major part of the increase is attributable to a special effect resulting from audit activities on the employment placement status of persons entitled to unemployment benefit II. But even if we take this special effect into account and consider the unemployment and underemployment in the legal group SGB III, which are not affected by the audit activities, seasonally adjusted there are noticeable increases”.
We will analyse the data later in a separate article.