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German joblessness dropped at the slowest pace in a year, pointing to labor-market vulnerabilities as the war in Ukraine and surging inflation weigh on Europe’s largest economy. 

Unemployment fell by 13,000 in April, keeping the jobless rate at the pre-pandemic level of 5%. Economists had estimated a reduction of 15,000 and the decline is the smallest since April 2021. 

“The arrival of spring and the easing of coronavirus measures is supporting the labor market’s continued recovery,” said Federal Labor Agency chief Detlef Scheele. “However, the development is being slowed down by Russia’s war against Ukraine.”

The outlook for Germany’s economy has darkened in recent weeks as the country’s important manufacturing sector suffers from input shortages and record prices pressures resulting from the war in Ukraine. The latest Covid outbreak in China and subsequent lockdown measures risk aggravating these problems. 

A business survey by S&P Global confirmed a loss in momentum among German factories this week, while warning that the slowdown will eventually affect hiring activity. Scores of companies including Volkswagen AG and BASF SE have warned of the risks they’re facing. 

Services have remained more resilient after coronavirus restrictions were lifted. Even so, the government in Berlin last week slashed its growth forecast to 2.2% for 2022, down from a previous prediction of 3.6%. 

Things could turn out significantly worse if there’s any disruption to the flow of Russian natural gas to Germany because of the war in Ukraine. Such a scenario would probably tip the country into recession, economists have warned. 

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