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EMPLOYMENT

Unemployment at new post-unification low

German unemployment fell in March to the lowest level since the country reunited in 1990 as growth in Europe's biggest economy continues to pick up, official data showed on Tuesday.

Unemployment at new post-unification low
Photo: DPA

The number of people registered as unemployed in Germany fell by a seasonally-adjusted 15,000 to 2.798 million in February, the Federal Labour Office said.

The unemployment rate — which measures the jobless total against the working population as a whole — slipped to 6.4 percent in March from 6.5 percent in February, also the lowest level since west and east Germany reunited in 1990 after the fall of the Berlin Wall the previous year.

In raw or unadjusted terms, the jobless total decreased by 85,500 to 2.932 million and the jobless rate eased to 6.8 percent in March from 6.9 percent in February, the labour office said.

Normally, unemployment declines in the spring as the warmer weather allows companies in sectors such as construction to take on workers.

But the current strength of the economic recovery in Germany was magnifying that effect, the labour office said.

"The labour market developed positively both on the supply and demand side," it said.

"The employment trend remains pointing firmly upwards. And usual spring upturn that begins in March was stronger than usual," it added.

German gross domestic product (GDP) expanded by 0.7 percent in the fourth quarter of last year, fuelled primarily by consumer spending and exports, but also by construction investment.

"Early indicators point to an overall favourable development in 2015," the labour office said.

Meanwhile, other European economies such as Italy continue to struggle.

The Mediterranean country is suffering from an overall employment rate of 12.7 percent, and 42.6 percent among people aged under 25.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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