Looking ahead, recruitment plans in both manufacturing and services have continued to weaken, and the number of vacancies is down to levels last seen during the pandemic. Still, other indicators like social media vacancies and hiring indicators at least point to some bottoming out. At the same time, ongoing announcements of potential cost-cutting measures across the automotive and other industries, along with the continuing increase in some bankruptcies, suggest that things could get worse before they get better.
With the worsening labour market, political uncertainty about the future of Germany’s pension system, and a broader sense of sombreness in the economy, it is no surprise that private consumption has worsened again. After a brief indulgence at the turn of last year, German consumers have again closed their wallets. This morning’s news that retail sales dropped by 0.3% month-on-month in October just strengthens this point. Even more so, as real wages were still up by almost 3% on the year in the third quarter, and the savings rate has almost come down to pre-pandemic levels – a statistical conundrum.
Overall, despite today’s favourable news from the labour market, a turning point is clearly not in sight. Instead, the very gradual worsening of the German labour market is likely to continue, clearly complicating any comeback of private consumption.