German employment growth picking up again

The number of unemployed in Germany in October is expected to have decreased by 5,000, following an increase of 2,000 in September. Although the decline in the number of unemployed has stabilised over the last few years, employment has continued to rise, thereby also reducing the unemployment rate. This could point to structural difficulties in reducing the number of unemployed further, with an increase in the labour force instead being needed to match employment growth. 

With demographic headwinds expected to increase in the coming years, policymakers are understandably concerned to raise labour supply to avoid weaker growth and/or inflationary wage pressures. The steady rise in vacancies, to ever new historical highs, also points in the direction of a tight labour market which soon could start hampering growth and inflation without further policy measures. While it remains to be seen to what extent the new immigrants to Germany will be able to find employment in the short term, German growth will need a sustained increase in labour supply in the coming years to stabilise economic growth.