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You are here: Home News German News German unemployment soarsto highest level since 1933
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02/02/2005German unemployment soarsto highest level since 1933

2 February 2005

NUREMBERG - German unemployment surged to 5.04 million, the highest since the 1993 and the dark days surrounding the rise of Adolf Hitler, according to data released on Wednesday by the Federal Labour Office.

The 573,000 jump in the seasonally unadjusted numbers out of work in Europe's biggest economy pushed up the unemployment rate to a grim 12.1 percent as key government labour market reforms and the traditional winter jump in job seekers triggered a rise in the country's dole queues.

This was 439,000 more than in the same month last year with the Federal Labour Office in Nuremberg warning of another rise in joblessness this month..

In seasonally adjusted terms, the data released by the Labour Office showed January unemployment rising by 227,000, which was more than the 150,00 that analysts had predicted. About 220,000 of the increase are a result of Berlin's job reforms.

But Labour agency board member Heinrich Alt warned that unemployment had yet to peak - that another rise could be expected when February data are released.

Speaking at a press conference in Berlin German Economics and Labour Minister Wolfgang Clement said the figures represented "five million reasons for labour reform,'' who insisted that the government's changes introduced so far had revealed the true number of people without work.

Either way, the dramatic rise in the numbers out of work in January is likely add to the pressure on Chancellor Gerhard Schroeder's ruling Social Democrats as they prepare for two crucial state elections in the coming months.

Indeed, Schroeder needs to substantially cut back jobless numbers this year 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.

Besides the impact on the German labour market of the cold winter weather, the key reason behind the expected January jump was 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 to as to continue to receive benefits.

Releasing the data Labour office chief Frank-Juergen Weise said that in reality unemployment had not become bigger – but more transparent. "Until now, it was unclear how many welfare recipients were seeking a job," he said.

As a reminder of the fragile state of Germany's economic pickup, the unemployment data coincided with the release of figures showing retail sales falling by 2.7 percent compared with December 2003, which again underscored the reluctance of consumers to spend.

 However, some economists believe that signs of an improvement in the labour market could emerge in the coming months as economic growth takes hold. "Our assessments point to a turnaround in the next three months," Klaus Zimmermann, the president of the Berlin-based German Institute for Economic Research told the weekly "Die Welt."

He predicts that unemployment could average four million in 2006 compared to 4.4 million last year.

Crucially, while unemployment has continued to climb, employment has also been rising, increasing by 30,000 in November (the latest available figures) after rising by 28,000 in October.

That said, however, 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.

The 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.

[Copyright DPA with Expatica 2005]

Subject: German news


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