Germany's jobless recovery takes hold

4th August 2004, Comments 0 comments

4 August 2004 , NUREMBERG - German unemployment rose to 10.5 percent in July, the federal labour office said Wednesday, indicating that the country's labour market is failing to benefit from the recent recovery in Europe's biggest economy. Unemployment had been at 10.2 percent in June, but the seasonally adjusted number of jobless jumped by 11,000 month on month to 4.39 million in July. This was more than double the 5,000 increase that analysts had originally forecast for the month. The Nuremberg-based lab

 4 August 2004

NUREMBERG - German unemployment rose to 10.5 percent in July, the federal labour office said Wednesday, indicating that the country's labour market is failing to benefit from the recent recovery in Europe's biggest economy.

Unemployment had been at 10.2 percent in June, but the seasonally adjusted number of jobless jumped by 11,000 month on month to 4.39 million in July. This was more than double the 5,000 increase that analysts had originally forecast for the month.

The Nuremberg-based labour office also revised up the June data by 2,000, after it had first reported last month that the June unemployment numbers dropped by 1,000.

Unemployment levels have now risen for the sixth consecutive month, the office said.

In seasonally unadjusted terms, the unemployment levels for July have never been higher since Germany's historic unification almost 14 years ago, jumping by 126,500 to 4.36 million as a jobless recovery takes hold.

"All signs suggest the German economy is recovering. But this isn't yet having an effect on the labour market," said labour office chief Frank-Juergen Weise on releasing the data.

One of the key factors in July's rise was the number of school leavers and graduating students who were flooding onto the labour market and registering as unemployed, the office said.

The latest grim set of German unemployment data is bound to put extra pressure on Chancellor Gerhard Schroeder who is he faces a series of key election tests in the coming months.

The negative employment record also comes in the wake of the government's introduction of a string of deeply unpopular labour and welfare reforms aimed boosting jobs.

By contrast, fresh reports of sparkling profits from corporate Germany, including from carmaker BMW AG and chemicals giant BASF AG, indicated that rapidly growing exports are feeding through to company balance sheets.

However, instead of hiring, employers have continued to push through rigorous cost-cutting programmes aimed at reducing labour costs.

As a result, most analysts are not expecting any real improvement in the German labour market until later in the year or possibly even early next year.

"We see the labour market stabilising in the next few months with a noticeable improvement in 2005," said Ralph Solveen, economist with Commerzbank AG.

After growing at less than two per cent this year, some economists now expect the German economy to steam ahead by as much as three per cent in 2005.

Analysts say the German economy starts to create jobs when it has exceeded the two percent growth mark.

Nonetheless, high unemployment has cast a shadow over consumer sentiment in the nation, and weak consumer demand has been slowing the recent recovery after three years of economic stagnation.

Employers' reluctance to take on workers was also evident in official data released Wednesday which showed that employment in the country contracted by 10,000 in May, the latest available monthly data.

The number of job vacancies fell by 2,000 in July after dropping by 4,000 in June.

While seasonally adjusted unemployment in Germany's key western half rose by 15,000, it dropped by 4,000 in the eastern part of the nation.

However, with 18.5 percent in July, unemployment in the former communist east is still more than double of that in western Germany. The July jobless rate in the west was 8.4 percent.

DPA

Subject: German news

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