Germany's Unemployment Rises More than Expected amid Challenging Economic Conditions

According to the Federal Employment Agency (BA), the number of jobless individuals increased by 28,000 in seasonally adjusted terms compared to the previous month. The report also highlighted a rise of 13,000 in May from the preceding month. Analysts surveyed by Reuters had anticipated a similar figure of 13,000 for June.

The BA noted that unemployment in the country typically declines during early summer, with an average decrease of 28,000 or 1% over the three years preceding the COVID-19 pandemic.

However, this year all 16 federal states in Germany have experienced a rise in unemployment rates compared to the same period in 2022.

"The more difficult economic conditions are now also being felt in the labor market," stated labor office head Andrea Nahles, as quoted by Reuters. She further added, "Unemployment is rising and employment growth is losing momentum."

As the largest economy in the European Union, Germany has historically maintained one of the lowest unemployment rates on the continent. Nevertheless, the Labor Office reported an 8% year-on-year increase in the number of jobless individuals in June. The total number of unemployed, not seasonally adjusted, currently stands at 2,555,000.

The significant surge in unemployment rates can be partially attributed to the influx of refugees from Ukraine. Since February 2022, over a million individuals have arrived in Germany from Ukraine.

Last year, the German government initiated a job assistance program for Ukrainian refugees, resulting in a month-on-month increase of 103,000 unemployed individuals, or 5%, compared to June 2021.

Official data reveals that as of this month, 193,000 Ukrainian citizens remain unemployed in Germany. Furthermore, 499,000 employable Ukrainians are registered with job centers and employment agencies in Germany, compared to a mere 20,000 in February 2022, according to BA figures.

The labor office acknowledged that even without considering Ukrainian refugees, unemployment in Germany would have still risen on a year-on-year basis. Preliminary data from the German statistics office showed an unexpected increase in inflation to 6.4% in June, up from 6.1% in May.

Economists have referred to Germany as being in a "technical recession" since its economy contracted for two consecutive quarters at the end of 2022 and the beginning of 2023. The German central bank announced on Monday that it anticipated the recession to have ended in the spring quarter, projecting a slight rise in GDP from April to June.