German rise in unemployment three times worse than expected

The Telegraph:  German unemployment has risen by more than expected in a blow to hopes that it is recovering from a downturn.

There were another 25,000 people out of work in May, data from the Federal Labor Agency show, which was well ahead of Bloomberg expectations of a gain of 7,000.

The unemployment rate held at 5.9pc.

The Federal Labor Agency’s head Andrea Nahles said: “The spring recovery hasn’t really taken off this year.”

There were 702,000 job openings in Germany in May, 65,000 fewer than a year ago.

According to a labour office analysis, the number of professions with a pronounced shortage of skilled workers has fallen slightly, to 183 affected occupations from 200.

The shortage has eased for skilled labour in structural engineering and facade construction, as well as engineers in aerospace technology, the office said.

However, this is not indicative of a long-term trend, according to Ms Nahles. She said: “Due to demographic developments, many well-qualified and experienced skilled workers will continue to leave the labour market in the coming years.”

Germany is recovering from an economic contraction at the end of 2023.

The Ifo Institute said in March that Germany will be the worst-performing rich economy in the world for the second year in a row as chancellor Olaf Scholz battles a property downturn and uncertainty over net zero targets.

Its economic recovery hit the buffers last month as business confidence stopped growing.

The Ifo Business Climate Index held steady in May, ending a three-month run of increases that had boosted expectations of a solid economic recovery.

Germany’s Dax stock market fell as much as 1.3pc on Tuesday amid concerns that the US economy is also not as strong as thought.

In a separate development, the European Central Bank is expected to soon push several German banks to build up higher reserves to protect themselves against property defaults, according to Bloomberg News.

German banks with large real estate portfolios have seen their profitability hit as they increased their reserves in case of loan losses amid a housing downturn, where falling property prices have forced developers to cancel projects.

Eleven of Germany’s biggest banks set aside €2.5bn (£2.1bn) last year to offset loan defaults on commercial real estate.