Thursday, January 31, 2013

German Unemployment Number Pulls Wool Over Eyes

German unemployment unexpectedly declined in January for the first time in 10 months.

The number of people out of work fell a seasonally adjusted 16,000 to 2.92 million, the Nuremberg-based Federal Labor Agency said today. The adjusted jobless rate dropped to 6.8 percent, matching a two- decade low.

Although this is good news for political leaders, as it will give them ammunition to persuade the electorate that they are leading the country in the right direction, popping champagne corks and bring out the wurst, is premature.

Bloomberg reports:
Today’s decline in unemployment may not yet be a turning point, said Frank-Juergen Weise, President of the Federal Labor Agency. “There’s a chance the cold weather in the second half of January may bring an increase in unemployment in February,” he said.
The truth is that the German economic growth slowed to 0.7 percent in 2012 from 3 percent in 2011 and the Bundesbank predicts economic expansion will decelerate further to 0.4 percent this year. That compares to a contraction of 0.3 percent in the euro area, the country’s biggest export market.

Additionally, most of German's trade is conducted within the Euro zone and consequently it is advantaged by the comparative advantage it enjoys over weaker EU countries.

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