German unemployment fell slightly in October, dropping to its lowest level in 18 years as the impact of persistently strong growth in Europe's top economy continued to filter through to the jobs market.The German way ... the numbers speak for themselves. We went Left - and they did the economically right thing.
The number of jobless fell by 3,000 to a seasonally adjusted 3.153 million, figures from the Labor Office showed on Thursday, while the headline level dipped to 2.945 million, confirming figures announced a day earlier.
The headline reading fell below the 3 million mark — a key political threshold — for the first time since November 2008, to its lowest point since October 1992.
... On an adjusted basis, the jobless rate held steady at 7.5 percent.
In June, the German government announced an austerity package Why has the German (and broader European) economy sizzled at the same time as the much touted “Summer of Recovery” in the U.S. has fizzled?We can recover. All we need is the right leaders, the right policy, and time.
As economist John Cochrane puts it, belief in the efficacy of government expenditure as economic stimulus requires a world where “people make plans to consume more, invest more, and pay more taxes with the same income (emphasis added).” The “same income” point is significant because an increase in consumption for a given amount of national income naturally results in a larger trade deficit. The increase in aggregate consumption not only increases spending on imports, but also increases domestic spending on goods and services that would have otherwise been exported (see Tony Makin’s chapter).
Although no breakdown is yet available, most analysts anticipate that a major driver of the German economic expansion was an increase in net exports. Part of this is due to the decline in the value of the euro, which made German-produced goods less expensive, but some of it is directly attributable to stimulus spending in the U.S. and China. When a hypercompetitive, high-end manufacturing base like Germany sees major trading partners increase government expenditure, the optimal policy response is to do nothing. Some of the increase in external demand will translate to increased exports, providing a boost to the domestic economy without a penny of additional borrowing.
While the Obama Administration’s critique is reasonable from a raw arithmetic standpoint, blaming Germany’s robust growth on its failure to stimulate domestic consumption rings hollow. As the International Monetary Fund (IMF) explains in its 2010 review of the German economy, “Germany’s strong export orientation stems from the openness of its economy, its long-standing manufacturing traditions and its competitiveness in global markets.” After enduring nearly a decade of slow growth and low inflation, Germany has disinflated its way to an extremely competitive position thanks to painful labor market reforms. The cost of one hour of labor in Germany is now extremely low relative to the economic value added in that hour. Better coordination of public expenditures is not going to erase Germany’s huge competitive advantage in high-end manufacturing.
... that provided the private sector with a clear and unambiguous message that public debt levels would not grow unsustainably. This likely instilled confidence in the private sector by reducing households and businesses’ estimates of the burden of government, which leads to an increase in consumption and investment.
Sigh. They earned it.