German unemployment falls to 11.3pc in June

30th June 2005, Comments 0 comments

30 June 2005, NUREMBERG - Germany's unemployment rate dropped to 11.3 per cent in June, the Federal Labour Office announced Thursday, as a government drive to create low-wage jobs helped to ease pressure on the labour market.

30 June 2005

NUREMBERG - Germany's unemployment rate dropped to 11.3 per cent in June, the Federal Labour Office announced Thursday, as a government drive to create low-wage jobs helped to ease pressure on the labour market.

June unemployment fell by 102,500 in seasonally unadjusted terms to record its biggest drop in five years, bringing the total number out of work in Europe's biggest economy down to 4.704 million this month. The unemployment rate stood at 11.6 per cent in May.

However, while Germany's political parties often focus on the seasonally unadjusted number, the more market-sensitive adjusted jobless number dropped by 23,000 to 4.858 million in June after stagnating in May.

Economists had predicted that seasonally adjusted unemployment would also be unchanged in June with the build-up to the release of the latest data accompanied by another round of job cuts by companies in Germany.

The release of the latest jobless data comes just three months before Germany is expected to go to the polls in an early election, with high unemployment expected to play a decisive role in the outcome of the ballot.

While Economics Minister Wolfgang Clement welcomed the latest jobless data as a sign that Germany was on the correct course, opposition spokesman Ronald Pofalla accused the government of creating chaos on the labour market.

Signs that the German economy has slowed in recent months on the back of record oil price and high unemployment means that economic growth appears to have had almost no impact on boosting hiring.

With company costs rising as oil prices have pushed up to a record of around USD 60 (EUR 50) a barrel, economists say firms are likely to be more reluctant to take on additional workers.

"Economic impulses played no role in the reduction of unemployment," said labour office Frank-Juergen Weise in releasing the latest jobs data.

Instead, the labour office believes that seasonal factors, and Chancellor Gerhard Schroeder's Social Democrat-led government's push to encourage low-pay and part-time employment, are helping to underpin the fall in the numbers out of work.

Indeed, one of the principal factors behind the pickup in hiring in June was the recent warm dry weather in Germany, which meant that seasonally adjusted unemployment dropped by 4,000 in the more economically important west Germany and by 19,000 in the former communist east.

But unemployment continued to mark out Germany's economic divide. While joblessness in the west came in at 9.5 per cent in June, it was 18.5 per cent in the east.

However, separate data drawn up by the statistics office and also released Thursday showed employment edging up marginally by 0.2 per cent in May. Vacancies also increased by 10,000 to record the ninth consecutive monthly rise, the labour office said.

"Overall employment continued to expand due to vibrant growth in low-pay, part-time jobs," Annemarieke Christian, economist with Morgan Stanley.

"But," she said, "developments in (the more relevant) employment subject to social security contributions remain unfavourable." Economists believe that Germany will be lucky to grow by one per cent this year with job fears and now the prospects of early elections resulting in consumers continuing to be very reluctant to open up their wallets and to spend more.

A key survey released earlier this week showed consumer confidence in Germany falling for the third month in a row. Domestic demand in Germany slumped by 0.6 per cent in the first quarter.

A one per cent national growth rate also falls short of the two per cent expansion rate that most economists believe is necessary to create jobs in Germany.

At the same time, German companies have been taking advantage of the low-cost highly skilled workforce in Central and Eastern Europe to shut down operations in Germany and shift production to countries such as the Czech Republic, Hungary and Poland.

As a consequence, Germany is expected to experience another year of lopsided growth with exports remaining the mainstay of economic expansion and private consumption stagnating. Thursday's labour office data showed the total numbers out of work coming in at 470,600 more than the same month last year, when unemployment stood at 10.2 per cent.

But this largely reflects reforms introduced at the start of the year by the Schroeder government, which resulted in welfare beneficiaries being included on the jobless rolls.


Subject: German news

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