German Employment Growth Is Whacked in Q2

German employment growth took the expected hard hit in Q2 as jobs contracted at a 5.3% annual rate quarter-to-quarter. The year-over-year change is a drop of 1.3%. Clearly, the impact of the virus on employment levels has been substantial affecting trends over the past year and greatly disrupting any events in the current quarter.

German employment falls for two quarters running and the number unemployed has been rising for three quarters in a row as a slowing in global trade trends had preceded the strike of the virus.

Manufacturing employment in Germany has been sliding quarter-to-quarter for four quarters in a row. Of the 11 sectors in the table, five of them show persistent quarter-to-quarter declines in employment over each the last four months. The sector ‘business services’ comes close to that mark but instead can complain of four straight quarters without an increase in employment since employment was flat in one of the last four quarters and declining in the three others.

Despite this lingering aspect of weakness, there is no doubt that the real force of job loss came from the virus as the number unemployed rose sharply in Q1 and even more sharply in Q2. And in Q2, the bottom fell out of the job market as employment levels dropped sharply.

Levels of employment have been hit up and down the line with agriculture and forestry surprisingly hard hit and wholesale, retail, transportation & hotels not so surprisingly hard hit. The virus is very hard on the service sector.

In its monthly report, the Bundesbank, however, has set some strong expectations for Q3. It said Germany's economy is set to grow at a sharp rate in the third quarter, after a record fall in the second quarter due to the impact of the coronavirus containment measures. However, it tempered that optimism by adding that activity levels are likely to remain well below the pre-crisis level for some time more. The virus was a difficult thing to combat but its lingering reinfections pose at least as big a challenge for the future as if startups and shutdowns were they to continue that would greatly impact the economy and growth. Employment levels could remain depressed and stop-go policy could keep some professions and businesses on the sidelines for an extended and unintended holiday.