Germany’s jobless rate rose by a very modest amount in April, but the story is that it rose at all. Germany has started to teeter close to recession, as its regional neighbors have fallen into a period of outright contraction of gross domestic product (GDP). There is little reason to believe that the German economic situation will not worsen between now and the end of the year.
The German Federal Labor Agency reported that the number of unemployed persons in the country rose by about 4,000 to 2.94 million in April. The figure is barely a rounding error, unless it is taken in the context of whether the Germany economy can trim its sails and tack away from trouble.
The one hope that Germans had is that the downturn in the European Union could be offset by internal consumption by its citizens and external demand from trading partners, particularly the big economies of the United States, Japan, United Kingdom and China. Based on Germany’s extremely weak GDP and employment numbers, these factors have only barely succeeded in offsetting the crumbling of its economic allies in the area.
As to its large trading partners, the United Kingdom barely has dodged a triple-dip recession, and experts say that its drive to austerity to balance the national books will not allow GDP to improve. Japan may not be in full recession, and the Bank of Japan may have set policies to help its economy recover, but the results of its easing will take months to set in. Data about the U.S. economy has signaled what is at least a pause in expansion, perhaps because of high taxes and government expense cuts. China is still the healthiest of the world’s big economies, but its GDP expansion rate has tapered off too.
German consumers likely will follow the pattern of most consumers during periods when employment is threatened. They spend less and pay down personal debt. And they wait. That wait will continue until the jobs situation begins to turn around.
That waiting, coupled with modest export opportunities, is often a cause of a real downturn.
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