German unemployment data better than hoped

3rd January 2006, Comments 0 comments

3 January 2006, BERLIN - Signs of an economic pickup in Germany have helped to ease the pressure on the nation's fragile labour market with unemployment data released Tuesday coming in better than forecast.

3 January 2006

BERLIN - Signs of an economic pickup in Germany have helped to ease the pressure on the nation's fragile labour market with unemployment data released Tuesday coming in better than forecast.

While seasonally unadjusted unemployment rose to over 4.6 million in December or 11.1 per cent of the workforce, the numbers out of work in Europe's biggest economy in the more market sensitive seasonally-adjusted data recorded its biggest December fall in 15 years, dropping sharply by 110,000.

The seasonally adjusted fall was far more than the 10,000 decline that economists had predicted and came in the wake of a series of economic sentiment surveys and key data pointing to brighter prospects for the nation's economy. It also followed a 55,000 fall in the jobless numbers during November.

Moreover, the end-of-year increase in the unadjusted data was significantly less than was normally the case in December, said labour office chief Frank-Juergen Weise when releasing the data.

"The development of the last months gives us confidence for 2006," he said with the labour office now hoping that the numbers out of work will remain below the critical five-million mark than many analysts had feared it might reach during winter this year.

In previous years, unemployment in Germany has climbed by about 500,000 in unadjusted terms during December and January following the end of the Christmas business rush and as cold winter weather forces lay offs in sectors such as the building and service industries.

Indeed, a lower than normal round of lay offs in the building sector appeared to be a key factor underpinning the December job market.

Also contributing to the better-than-expected unemployment data has been the creation of a low-wage sector and measures to force the unemployed to take jobs as part of the raft of reforms introduced by the Social Democrat-led government of former Chancellor Gerhard Schroeder.

However, despite the unexpected fall last month, economists still remained cautious about predicting a sustained improvement in the job market this year.

"The (labour market) fundamentals are stabilising," said Rainer Guntermann, senior European economist with Dresdner Kleinwort Wasserstein. "But they are still not strong enough to ensure a lasting drop in unemployment," he said.

To be sure, German growth this year is expected to fall short of the two per cent rate that most analysts believe is necessary to result in a solid pickup in hiring with the run-up to the end of 2005 accompanied by the announcements of another round of lay offs by corporate Germany.

Coinciding with the release of the latest unemployment data, one of Germany's major economic institutes, the Berlin-based Deutschen Instituts für Wirtschaftsforschung (DIW) added its name to the growing list of economic forecasters expecting German growth to come in at about 1.7 per cent this year. It expects growth to dip back to 1.2 per cent in 2007.

Nevertheless, the better-than-forecast labour market data combined with the recent retreat in energy prices and government plans to hike the nation's VAT in January next year are expected to help underpin a long-awaited rebound in private consumption and consequently boost economic growth.

German consumer confidence hit a sixth-month high in January, a forward-looking survey reported last month.

But despite the optimism about Germany's economic prospects as the economy hauls itself out of a protracted period of stagnation and some modest company hiring plans, leading business industry groups are not predicting any big jump in employment by their corporate members.

Underscoring expectations of only a minor overall improvement in Germany's labour market this year, the latest official data showed both employment and job vacancies in the country declining in the months leading up to the end of 2005.

What is more, conservative leader Angela Merkel's new grand coalition government has so far failed to set out any comprehensive proposals for reforming the job market and tackling the array of labour regulations that economists believe hinder job creation in the country.

With Berlin having announced little in the way of labour market reform, the general secretary of Germany's opposition Free Democrats, Dirk Niebel, insisted that December data did not signal a turnaround in the labour market and that the government had still not reached an agreement on how to create jobs.

At the end of 2005, unemployment stood at 9.5 per cent in Germany's more economically important western half and 17.3 per cent in the nation's former communist east.


Subject: German news

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