German unemployment set to hit post-war record

1st February 2005, Comments 0 comments

1 February 2005 , BERLIN - German unemployment is set to hit a new post-Second World War record on Wednesday as key government labour market reforms and the traditional winter jump in the numbers out of work trigger a surge in the country's dole queues. German Economics Minister Wolfgang Clement has already warned the January data to be released by the Federal Labour Office will be "horrible" with unemployment in Europe's biggest economy possibly breaching the psychological five million mark for the first

1 February 2005 

BERLIN - German unemployment is set to hit a new post-Second World War record on Wednesday as key government labour market reforms and the traditional winter jump in the numbers out of work trigger a surge in the country's dole queues.

German Economics Minister Wolfgang Clement has already warned the January data to be released by the Federal Labour Office will be "horrible" with unemployment in Europe's biggest economy possibly breaching the psychological five million mark for the first time.

In seasonally adjusted terms, economists are predicting that German joblessness will climb by 150,000 in January to push the unemployment rate up to above a very grim 11 percent.

Besides the impact on the German labour market of the cold winter weather, the key reason behind the expected January jump is the statistical impact of the government's decision to merge unemployment benefits with welfare benefits from 1 January.

The result is that people who are currently on welfare benefits but not registered as without a job will need to register with the labour office and to seek employment so as to continue to receive benefits.

What is more, despite signs that Germany has entered the new economic year on a relatively sure footing, the moderate growth rate is still failing to help underpin hiring in the nation.

Added to this, some economists are concerned that the strong euro might offset any benefits from the government's reform measures as employers seek to cut additional costs arising from the currency's increase by clamping down on job creation or trimming their workforce.

Chancellor Gerhard Schroeder's Social Democrat-led government has introduced a series of job reforms, including cuts in welfare benefits, pressure on the unemployed to find work and liberalising Germany's strict hire and fire rules, as part of a wider agenda aimed at shoring up the nation's growth rate and international competitiveness.

With this in mind, the government has also sought to ease non-wage labour costs, such as pension and healthcare contributions, so as help pave the way for job creation.

"Through our reforms, the complete truth about the labour market will come to light," Clement said ahead of Wednesday's release of the jobless data. "In the future there will be no 'dark numbers', no hidden or repressed jobless."

Either way, Schroeder needs to substantially cut back jobless numbers in the coming months so as to build on a recent pickup in his government opinion poll ratings and to ensure that it is on course to victory in the 2006 national elections.

As a reminder of the fragile state of the German labour market, giant German electronics group, Siemens AG announced last week that it was trimming its German fixed-line business workforce in Germany by 600.

The latest unemployment data are to be released against the backdrop of a surprise jump in German business confidence and a more optimistic outlook from the country's hard-pressed consumers.

But there are concerns that a sizeable leap in unemployment might again alarm consumers and as consequence setback any substantial pickup in domestic demand in the nation.

However, some economists also believe that signs of an expansion in employment in Germany could help to underpin consumer demand in the coming months.

Indeed, while unemployment has continued to climb - hitting a seven-year high in December - employment has been moving in the other direction, rising by 28,000 in October, which was the latest available figures.

"This is an encouraging signal for a revival of the German consumer," said Annemarieke Christian, economist with the international bank Morgan Stanley.

Moreover, the increase in payrolls tend to reflect another crucial part of the government's labour reform drive, which is to focus on the low-paid job sector by encouraging the unemployed to become self employed or sign up for so-called "mini-jobs", which pay EUR 400 or less a month.

DPA

Subject: German news 

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