The German labor market is recovering in large steps from the Corona crisis thanks to the extensive opening of the economy.

As the Federal Employment Agency announced on Thursday in Nuremberg, the number of unemployed fell by 24,000 to 2.59 million in July.

This is also noteworthy because it usually rises in summer, when some companies go on vacation and only then take on new employees.

At the same time, many young people register at least briefly as unemployed after completing their school or company training.

Britta Beeger

Editor in business.

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According to the BA statistics, unemployment in Germany has only fallen once since reunification in July: That was in 2006 and, in addition to the good economy, was also due to a technical factor - the BA changed its operational placement system at that time and in this context systematically updated their database.

BA boss Detlef Scheele had already expressed the cautious hope in June that unemployment could go against the trend in July.

"The situation on the labor market continues to improve," he said now of the publication of the latest figures.

The effects of the corona crisis are becoming smaller

As in the two previous months, the number of unemployed has also decreased seasonally adjusted, i.e. taking into account the usual seasonal fluctuations: by a substantial 91,000. The effects of the corona crisis are still visible, but they will be significantly smaller. The corona effect calculated by the BA, which indicates how unemployment would have developed without the pandemic, currently amounts to an increase of 316,000 unemployed, which is only about half as many as in the summer of last year. The unemployment rate fell by 0.1 percentage points to 5.6 percent in July.

For the third month in a row, according to the BA, the number of short-time workers also fell. According to preliminary extrapolated data, 2.23 million employees in Germany were still on short-time work in May - more recent data are not yet available. In the meantime it should be significantly less.

At the same time, the upward trend in employment is continuing.

According to the Federal Statistical Office, 44.7 million people residing in Germany were employed in June, 74,000 or 0.2 percent more than in the previous month of May.

The increase is more than twice as high as the average of the five pre-crisis years 2015 to 2019. Seasonally adjusted, the increase is even more of 78,000.

However, the number of people in employment is still well below the pre-crisis level: seasonally adjusted, 573,000 fewer people were in employment in June than in February 2020, the month before the start of the restrictions caused by the corona pandemic in Germany.

The good development should continue

Leading indicators suggest that the good development could in principle continue. The local employment agencies in Germany anticipate that unemployment will continue to fall sharply in the coming months, as the latest labor market barometer from the Institute for Employment Research, which is part of the BA, shows. The increase in employment is therefore unlikely to keep pace with the decline in unemployment.

On the one hand, this could be due to the fact that, due to the relaxed contact restrictions, more people can take part in labor market policy measures again, said research department head Enzo Weber. You are then officially not considered unemployed, but you are also not in work. On the other hand, the labor potential is developing weaker than in the years before the pandemic.

German companies slowed down their search for new employees somewhat in July, as the employment barometer of the Munich-based Ifo Institute showed, which is based on the employment intentions of around 9,000 companies. The industry is therefore hiring heavily, but the service sector and especially the personnel service providers have become more cautious. Nevertheless, this indicator also suggests that the recovery on the German labor market will continue.