German unemployment extended its decline in March as companies in Europe’s largest economy boosted their labor force to keep up with bulging order books.

The jobless rate dropped to a record low of 5.3 percent in March, the Federal Labor Agency in Nuremberg said. The number of people out of work plunged a seasonally adjusted 19,000 to 2.373 million. Economists surveyed by Bloomberg forecast a drop of 15,000.

Germany has been a key beneficiary of buoyant global trade and domestic spending, and the Bundesbank says the economy’s strong upturn probably continued in the first quarter of this year. While sentiment indicators have recently taken a hit amid mounting fears over U.S. protectionism, the high volume of orders accumulated in the second half of last year is likely to support manufacturing activity for now, according to the central bank.

Fading optimism may have some effects “here and there, but we don’t see it as a trend reversal,” Detlef Scheele, head of the federal labor agency, said at a press conference in Nuremberg.

One risk facing some sectors is that the country’s increasingly tight labor market will limit companies’ ability to hire staff to sustain growth. Construction is seeing “considerable capacity bottlenecks,” according to the Bundesbank, and one in four businesses cite labor shortages as a reason for holding back production, EU data show.

Joblessness fell by about 17,000 in west Germany and by 2,000 in the eastern part of the country. Data on euro-area unemployment will be published and are forecast to show a drop to 8.5 percent, the lowest in more than nine years.

Source: Bloomberg

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