Figures for July: surprising improvement in the labor market

The labor market continues to recover from the consequences of the corona pandemic: Contrary to the usual seasonal pattern, the number of unemployed fell further in July. According to the employment agency, 2.59 million people were unemployed.

The labor market in Germany developed significantly better in July than usual for this holiday month. The number of unemployed fell from June to July by 24,000 to 2.59 million, as the Federal Employment Agency (BA) announced. In other years, an increase of about 55,000 in July was common.

This seasonal effect was more than offset by the stronger upturn in the labor market that began after the corona easing. The unemployment rate fell to 5.6 percent. According to the Federal Employment Agency, it is the first fall in unemployment in July since 2006.

Companies are looking for staff

“The situation on the labor market continues to improve,” said BA boss Detlef Scheele. “Despite the beginning of the summer break, unemployment and underemployment continued to fall sharply. The growth in employment continues. And companies are increasingly looking for new staff.”

If the seasonal effects are factored out, the number of unemployed fell by as much as 91,000. Economists had expected a decline of only 28,000.

Short-time work is clouding the numbers somewhat

However, the advertisements for short-time work went up again slightly. In the high phase of the corona pandemic, short-time work was used as a means of bridging the job market so as not to have to lay off staff. Between July 1 and July 25, the Federal Agency received notifications for short-time work for 75,000 employees. A month earlier it was 59,000. This can also be related to the fact that industrial companies are currently having to shut down their plants due to supply bottlenecks for raw materials.

Data on the actual use of short-time working will be available by May 2021. According to this, 2.23 million people received short-time work benefits in May. In April 2021 there were 2.34 million. At the height of the first corona lockdown, the federal agency had to pay short-time work benefits for almost six million people in April 2020.

Economic recovery

The improvement in the labor market can be traced back to the economic recovery. The gross domestic product is likely to have grown by 2.0 percent in the spring quarter, predict the average of 36 economists surveyed by the Reuters news agency. In the first quarter of the year, Europe’s largest economy had shrunk by 1.8 percent due to the third corona wave.