German unemployment falls for fourth straight month in March

By Michelle Martin

BERLIN (Reuters) – German unemployment fell for a fourth consecutive month in March, data showed on Tuesday, highlighting the strength of the job market in Europe’s largest economy and boding well for expectations that domestic demand will drive growth this year.

The number of people out of work decreased by 12,000 to 2.901 million, data from the Labour Office showed. The mid-range forecast in a Reuters poll had been for a drop of 10,000.

“Good news all round,” said Christian Schulz, economist at Berenberg Bank. “The fact that unemployment just continues to go down reflects the strength of this recovery.”

The jobless rate held steady at 6.7 percent after the reading for February was revised down from 6.8 percent. That was lower than the 6.8 percent consensus forecast in a Reuters poll.

Such data makes Germany the envy of other euro zone states like Greece, where the jobless rate hit a record high of 27.5 percent in the last quarter of 2013.

“The German labour market is well on track and that raises the risk the labour market is getting a bit tighter, so there’s a chance this will lead to higher wage increases,” said Schulz, adding that strikes by pilots and public sector workers pointed to the employees’ strength in wage negotiations.

A strong labour market, combined with moderate inflation and low interest rates which encourage consumers to spend rather than save, should boost private consumption in Germany.

That was borne out by data on Monday showing retail sales rose for a second straight month while last week a survey showed German consumer morale held steady at its highest level in more than seven years.

Other recent backward-looking hard data has been largely upbeat, showing imports, exports, industrial output and orders rising. But data published on Tuesday showed growth in the manufacturing sector slowing and engineering orders falling.

Leading forward-looking sentiment surveys have taken a turn for the worse of late, with business morale and investor sentiment weakening due to the Ukraine crisis.

(Additional reporting by Annika Breidthardt; Editing by Stephen Brown)

German unemployment falls for fourth straight month in March