German unemployment falls ahead of election

31st August 2005, Comments 0 comments

31 August 2005, NUREMBERG, GERMANY - With just weeks to go before Germany's national election, unemployment in Europe's biggest economy edged down to 11.4 per cent in August, the federal labour office said Wednesday.

31 August 2005

NUREMBERG, GERMANY - With just weeks to go before Germany's national election, unemployment in Europe's biggest economy edged down to 11.4 per cent in August, the federal labour office said Wednesday.

This compares to 11.5 per cent in July and follows a fall of 44,000 to 4.728 million in the seasonally unadjusted and politically more important numbers of people out of work. It was the largest August fall in a decade.

In the more market sensitive seasonally adjusted terms, unemployment fell by 12,000 for the fifth consecutive month to 4.796 million, adding to signs that the German economy is slowly emerging from a protracted period of stagnation.

However, this was less than the 20,000 forecast by economists with Wednesday's unemployment data the last before Germans go to the polls on September 18.

Federal Labour Office chief Frank-Juergen Weise said the August data indicated that the regular autumn pick-up in the labour market was starting to take shape.

With Germany's ruling Social Democrats (SPD) struggling to hold on to power in next month's election, Labour and Economics Minister Wolfgang Clement seized on the August data as a sign of a turning point in the labour market.

But despite evidence of underlining improvement in the country's hard-pressed labour market, additional costs resulting from a surge in oil prices has undercut economic activity in Germany and made industry reluctant to take on new workers.

Unemployment has emerged as a key issue in the election with opinion polls pointing to a win by the conservative opposition Christian Democrats, reflecting voter frustration over the failure of Chancellor Gerhard's SPD to boost jobs significantly.

Instead, corporate Germany has moved in recent years to press on with wide-ranging restructuring including cutting tens of thousands of jobs and shifting operations out of the country to low-cost areas such as Central and Eastern Europe.

Economists say the fall in unemployment has been principally a result of Schroeder's tough welfare and labour reforms which have been aimed at promoting low-wage jobs and forcing the long-term unemployed to seek out work.

Despite expectations that the German economy should gain momentum in the run-up to the end of the year, few are expecting any dramatic upswing in the hard-pressed labour market.

Economic forecasters say the German economy will be lucky to grow by one per cent this year, which falls short of the two per cent that analysts say is necessary to promote job creation.

High joblessness, weak wage growth and soaring oil prices, which hit another record this week of more than 70 dollars a barrel have also combined to dampen private consumption in Germany.

Official data also released Wednesday showed retail sales posting a surprise fall in July.

Adjusted for inflation and seasonal factors, retail sales dropped by 0.6 per cent in July to record their second monthly decline. Economists had forecast an increase in July. Compared to 12 months ago, retail sales were down three per cent.

However as a sign that private consumption might be pulling itself out of the doldrums, a key consumer confidence survey this week recorded its first rise in five months partly on hopes that next month's election will set the stage for more prosperous economic times.

While unemployment in the west remained stuck at 9.6 per cent, in the eastern part of the country the jobless rate slipped by 0.4 points to 18.2 per cent.

DPA

Subject: German news

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