Unemployment chalksup first fall this year

6th July 2004, Comments 0 comments

6 July 2004 , NUREMBERG - German unemployment unexpectedly fell in June, federal labour office data released Tuesday showed, raising hopes that the worst might now be over for the country's hard-pressed labour market. Unemployment fell by 59,700 to 4,233,400 in June, lowering the overall unemployment rate to 10.2 percent down from 10.3 per cent in May. However the decline was not as strong as in June last year when unemployment fell by around 80,000. When the figures are adjusted to account for seasonal fa

6 July 2004

NUREMBERG - German unemployment unexpectedly fell in June, federal labour office data released Tuesday showed, raising hopes that the worst might now be over for the country's hard-pressed labour market.

Unemployment fell by 59,700 to 4,233,400 in June, lowering the overall unemployment rate to 10.2 percent down from 10.3 per cent in May. However the decline was not as strong as in June last year when unemployment fell by around 80,000.

When the figures are adjusted to account for seasonal factors unemployment in June hovered at 10.5 per cent for the third consecutive month, or a drop of 1,000 to 4.369 million.

The modest economic recovery underway in the country is still not strong enough to result in a big boost to payrolls, but does help to ease some of the pressure on German Chancellor Gerhard Schroeder's Social Democrat-led Government.

While unemployment in Germany's former communist east rose by 5,000, economists saw a 6,000 fall in the numbers out of work in the more economically important western part of the nation as an encouraging sign that the labour market might be stabilising.

German Economics and Labour Minister Wolfgang Clement seized the latest unemployment data as evidence that the trend towards job cuts had come to an end.

But Labour office president Frank-Juergen Weise said the June decline reflected the usual upturn in the jobs market during spring and early summer rather than evidence that employers were hiring again.

Weise went on to say that the string of labour market changes introduced by Schroeder's government, aimed at cutting the cost of labour and liberalising Germany's strict hire-and-fire laws had also helped to prevent unemployment from rising.

The labour office chief's views were echoed by private economists with Ralph Solveen, economist with Commerzbank AG saying that after the long run of monthly increases in seasonally adjusted unemployment the June data only offered a glimmer of hope for the future.

Indeed, many economists are not expecting any significant turnaround in the German labour market to emerge until later in the year or even next year when the economic upswing broadens and gains momentum.

Economists and economic institutes have been revising up their German growth forecasts for the year. Still, growth is expected to fall short of the two per cent rate that analysts believe is necessary to underpin a dramatic pickup in jobs.

In the meantime, the high unemployment rate in the country is likely to continue to dampen consumer sentiment with sluggish household spending representing a drag on the nation's recovery, which began to take shape as the new year started. German Retail sales dropped 1.7 percent in May to record the largest decline since November.

Moreover, instead of taking on new workers, a growing number of German companies have been moving to negotiate new wage deals with unions aimed at extending working hours without any corresponding increase in pay.

At the same time, leading German corporations such as retailer KarstadtQuelle AG have been pressing ahead with cost-cutting programmes and raising the prospect of more big layoffs or new moves to export jobs by shifting part of their operations to low-cost high-skilled areas such as Asia or Central Europe.

As a further sign of the fragile state of the labour market, the labour office data showed job vacancies slumping by 4,000 in June after increasing by 2,000 in May.

Parallel to the Nuremberg office figures, the Federal Statistics Office in Wiesbaden reported that in April the number of job-holders in Germany totalled 37.96 million, down by 169,000 or 0.4 per cent from April 2003 levels.

The office said that while the April employment level was down year-on-year, the figure was some 238,000 higher than the low-water mark of 37.64 million job-holders in January.

DPA

Subject: German news

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