The jobless rate had begun flatlining in June, which was just 0.1 percentage point up on May, seasonally-adjusted figures from the BA federal labour agency showed.

Before the pandemic struck Europe's top economy, the ranks of the unemployed had hovered at around 5.0 percent, record lows since reunification.

READ ALSO: German unemployment stable despite recession warning

“The job market remains under pressure because of the coronavirus pandemic, even if the German economy is now on a recovery path,” noted Daniel Terzenbach, who heads the BA's regions department.

The impact of the crisis on the job market has been cushioned by Germany's shorter hours scheme, in which the government tops up workers' wages when  their shifts are slashed.

After an initial surge to 10.6 million in March and April combined, the numbers of new applications for the scheme have come down significantly.

Between July 1st and 26th, applications were received for 190,000 workers.

Latest data showed that payments for shorter hours were paid to 6.7 million workers in May, up from 6.1 million in April and 2.46 million in March.

Underlining the scale of the crisis sparked by the closure of borders, shops and schools to halt transmission of the virus, the BA said the demand  for the scheme was “far above the time of the major recession in 2008 and 2009.”

Nearly 650,000 businesses also applied for Kurzarbeit (shorter-worker hours), levels not seen since the 2009 financial crisis. 

Shrinking German economy

The German economy shrank by a record 10.1 percent in the second quarter of 2020 because of the coronavirus impact, official data showed Thursday, the biggest decline in the country's post-war history.

Federal statistics agency Destatis said “the historic decrease” quarter-on-quarter was worse than any seen during the financial crisis of 2008-2009.

The pandemic had led to “a massive slump” in both exports and imports, it said, but noted that government spending had increased from April to June.

But it's not all bad news: Germany has withstood the coronavirus shock better than many of its neighbours.

Stable infection rates encouraged the country to relax coronavirus restrictions in early May, allowing factories, shops and restaurants to reopen.

Thursday's data “is a glimpse in the rearview mirror”, ING bank analyst Carsten Brzeski told AFP.

“The economy already began picking up in the course of the second quarter.”

Altmaier said he expects the German economy to return to growth in October, boosted by unprecedented government stimulus to spur investment and consumer spending, alongside huge rescue packages that have helped companies like Lufthansa stay afloat and preserve thousands of jobs.

READ ALSO: EU approves huge bailout of German giant Lufthansa

Germany's bounce-back should also get a lift from the European Union's 750-billion-euro coronavirus recovery plan.

Altmaier's ministry forecasts that German output will contract by 6.3 percent in 2020 before expanding by 5.2 percent in 2021.

By contrast, the European Commission expects the economies of France, Italy
and Spain to shrink more than 10 percent this year.

Second wave fears

Better-than-expected business and consumer confidence surveys recently suggested Germans are feeling more optimistic about the future.

But concerns have grown over a spike in COVID-19 cases at home and across Europe, partly fuelled by summer travel.

As an export powerhouse, Germany is highly vulnerable to virus setbacks in other countries that could lead to renewed shutdowns that once again disrupt supply chains and suppress demand.

In April and May, at the height of the global lockdowns, German exports plummeted around 30 percent year-on-year.

Germany's mighty industrial sector, already feeling the pain from US-China trade tensions and Brexit uncertainty, has been especially hard hit.

Car manufacturing alone fell 40 percent year-on-year over the first six months of 2020, a 45-year low.

ING analyst Brzeski said German exports would take time to return to pre-pandemic levels, leaving the country to rely on domestic demand to power its rebound.

KfW chief economist Fritzi Köhler-Geib said the German economy had a “successful start” to the summer but it was “too early to give the all-clear”.

“The pre-crisis level will remain a long way off for the foreseeable future, and the continuing fierce rage of the pandemic in large parts of the world is an enormous risk for Germany as an export nation.”