German unemployment stable in March as war rattles economy

German unemployment stayed at five percent in March, figures published Thursday showed, as the war in Ukraine darkened the outlook for Europe’s largest economy.

The number out of work went down by 18,000 in March on a seasonally adjusted basis, although the overall joblessness rate remained unchanged from February, the BA federal labour agency said.

Russia’s invasion of its neighbour, which has added to supply chain disruptions and sent prices for energy rocketing, has so far only had an “isolated” impact on the labour market, BA regions director Daniel Terzenbach said.

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But the risk that supplies of natural gas and oil from Russia could be cut off if the conflict were to escalate were “weighing on the economic outlook” for Germany, Terzenbach said.

The Ukraine conflict derailed Germany’s hopes of growth seeing a surge in economic growth as coronavirus-related health restrictions fell away.

Germany’s reliance on imports of Russian gas and the importance to the economy of industry, which has been buffeted by supply bottlenecks, mean the country is particularly exposed to the conflict. 

A panel of the government’s economic advisers on Wednesday drastically cut their forecast for growth in 2022 to 1.8 percent, down from their previous estimate of 4.6 percent.

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The war was putting “additional strain” on supply chains stretched by the pandemic, while the spike in energy prices was weighing on businesses and consumers, said a member of the expert panel, Achim Truger.

Interruptions to deliveries of key components from suppliers in Ukraine has already led to interruptions in production at a number of German auto manufacturers, including Volkswagen and BMW. 

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