Germany’s job recovery slows as supply squeeze slows growth

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The recovery of the labor market in Germany continued at a slower pace in September amid a slower reopening boom.

Unemployment in Europe’s largest economy fell by 30,000 this month, keeping the unemployment rate at 5.5%. In the euro zone, unemployment fell to 7.5% in August.

German growth forecasts have been revised down in recent weeks as companies grapple with persistent shortages of parts and raw materials. The problem became even more acute in September, when more than 77% of German manufacturers said they faced such problems, according to the Ifo institute.

Services are continuing their rebound after coronavirus shutdowns, although momentum has moderated somewhat. Unemployment in Italy, which relies heavily on tourism, held steady at 9.3% in August, disappointing forecasts for a slight drop.

As industry across Europe reports full order books and consumers ignore concerns over rising energy prices, workers on leave are increasingly returning to their jobs.

In Germany, the number of people receiving state wage assistance fell to less than 700,000 last month, according to Ifo, from a pandemic peak of around 6 million in April 2020.

(Updates with euro area data in the second paragraph, Italian figures in the fourth.)

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