German unemployment unexpectedly rose for the first time in more than two years in October and manufacturing contracted as pessimism mounted among businesses in Europe’s largest economy.
The number of people out of work rose a seasonally adjusted 10,000 to 2.94 million, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 10,000, the median of 31 estimates in a Bloomberg News survey showed. The adjusted jobless rate rose to 7 percent from 6.9 percent. A separate report showed factory output dropped.
“It’s too early to call this a trend change in the labor market, but it shows that growth forces are weakening,” Lothar Hessler, an economist at HSBC Trinkaus & Burkhardt AG (TUB) in Dusseldorf, said in an interview. “The dynamism of the economic upswing is lessening more than thought.”
German companies are growing more reluctant to hire workers as Europe’s worsening fiscal crisis clouds growth prospects. German investor sentiment fell to the lowest in almost three years last month and business confidence dropped to a 16-month low. In the 17-member euro region, manufacturing output declined more than previously forecast in October, suggesting the region is edging toward a recession.
The euro was little changed after the report, trading at $1.3771 at 10:47 a.m. in Frankfurt, up 0.5 percent on the day.
“The positive development on the labor market has continued all in all, based on the most recent data, and is following the good economic development” the labor agency said in a statement.
The Organization for Economic Cooperation and Development lowered its euro-region growth forecasts for this year and next on Oct. 31, saying the region will show a “marked slowdown with patches of mild negative growth.” The Paris-based group, which didn’t give growth projections for Germany, called on European leaders to prevent contagion spreading from Greece.
Deutsche Bank AG, Germany’s biggest lender, signaled more jobs may be at risk as the European sovereign debt crisis and global economic slowdown crimp investment-banking revenue. Chief Financial Officer Stefan Krause said on Oct. 25 the Frankfurt- based bank will continue to adjust its “platform” if the environment persists after announcing 500 job cuts.
The German economy may fail to grow in the current quarter, the Berlin-based DIW institute predicted on Oct. 26. Expansion will slow to 0.8 percent in 2012 from 2.9 percent this year, the country’s top economic institutes said on Oct. 13 in their twice-yearly report commissioned by the government. In April, the group forecast growth of 2 percent next year.
“The latest monthly rise in the adjusted figure should not mark the end of the impressive upswing on the German labor market,” Alexander Koch, an economist at UniCredit SpA (UCG)in Munich, said in an e-mailed comment. “Despite the recent strong deterioration in the global economic environment, corporate employment plans do not signal an imminent turnaround.”
While banks may be forced to eliminate more positions as the debt crisis erodes earnings, car makers, the industrial mainstay of the German economy, are still taking on staff as demand in the luxury car market holds up.
Porsche AG broke ground on Oct. 18 on a 500 million-euro ($682 million) expansion of a factory in Leipzig where the sports-car maker is hiring more than 1,000 workers. Daimler AG (DAI), maker of Mercedes-Benz cars, said on Oct. 27 it employed 3,360 more people in Germany at the end of the third quarter than it did a year earlier as it targets record car sales.
Germany’s harmonized jobless rate was 6 percent in August, according to the OECD. That compared with 9.1 percent in the U.S., 9.9 percent in France, 7.9 percent in Italy and an OECD European average of 9.4 percent.