Expatica news

German job marketremains under pressure

6 April 2004

NUREMBERG – Germany’s hard-pressed job market is displaying no real sign of recovery, despite data released Tuesday showing the unemployment rate in Europe’s biggest economy edging down slightly to 10.9 percent in March from 11.1 percent in the previous month.

While unemployment fell an unadjusted 93,600 to 4,547,500 in March, the federal labour office said the more market sensitive seasonally adjusted data jumped by 44,000, which was far more the 15,000 increase that economists had predicted.

This was the third monthly rise in the seasonally adjusted jobless number and as consequence again casts a shadow over the outlook for the German economy.

It also provides no respite for Chancellor Gerhard Schroeder. Hit by plunging public support, his Social Democrat-led government is struggling to cut the country’s unemployment and to press on with a rigorous reform agenda.

“The situation on the labour market remains tense,” said Ralph Solveen, economist with Commerzbank AG in Frankfurt.

Labour office chief Frank-Juergen Weise said the figures underscored the on-going weakness in the German economy, adding that the drop in unadjusted unemployment was the result of the usual spring season improvement in the job market.

But economists said the traditional pickup in hiring in early spring appeared to be weaker than in previous years with the March data also indicating that the positive impact of Schroeder’s changes to the Nuremberg-based labour office, cuts in the numbers registered as unemployed and the launch of new job creation schemes were starting to fade.

The shake-out of the labour office forms part of a broader reform agenda which includes liberalising Germany’s tough hire-and-fire laws, cutting unemployment benefits and reducing the high cost of German workers.

Of particular concern to economists was the sharp contraction in employment in Germany, which is often taken as a key economic indicator, and the impact on consumer confidence of a bleak labour market.

According to the labour office data, the number of people working in the nation dropped by 15,000 in January, which was the biggest fall in four months.

“All in all, the various labour market indicators suggest that labour market conditions are worsening again,” said Elga Bartsch, European economist with Morgan Stanley in London.

“If this deterioration persists this could spell further trouble for an already shaky consumer spending recovery in Germany,” she said.

This is also in line with concerns expressed last month by European Central Bank chief Jean-Claude Trichet about the impact of weak household spending on economic growth with the grim state of the labour market keeping German consumers from taking to the nation’s shops and showrooms.

Economists believe that a rebound in consumer spending is crucial to underpinning recovery in the 12-member eurozone and Germany, both of which are battling to haul themselves out of about three years of economic stagnation.

Combined with a recent batch of less-than-encouraging economic data, the disappointing March German unemployment data is likely to add to the pressure on the European Central Bank to cut rates.

A growing number of economists now expect the ECB to trim borrowing costs by the middle of the year in a bid to shore up eurozone growth.

Both business and investor confidence have also slumped in Germany, raising fresh concerns about the outlook for the nation’s economy and leading many analysts to begin revising down their growth forecasts for the year.

As a result, the prospects of a pickup in the labour market this year is also starting to diminish with analysts expecting German economic growth in 2004 to fall well short of the two per cent needed to create jobs.

Expressing concern about the continuing weak state of Germany’s economy, German Economics and Labour Minister Wolfgang Clement said that the nation needed more economic growth and above all more investment.

But Laurenz Meyer, the general secretary of the opposition Christian Democrats, lashed out at the government saying that the long-promised economic upswing had not eventuated.

The renewed worries about Germany’s labour market also comes as the build-up to the historic expansion of Europe on 1 May into Central Europe fuels worries about German companies shifting operations and jobs to some of the low-cost highly skilled nations that are set to join the European Union next month.

Amid announcements by big German companies of new moves to cut their workforces as they press on with corporate restructuring, the giant Munich-based electronics group Siemens last week said that it considering shifting about 2,500 jobs to low-cost nations.

Labour market analysts noted that during the past 10 years, the average drop in joblessness in March had been 150,000, so that this year’s improvement was well below that average.

While the unadjusted number of unemployed was 62,200 lower than in March last year, the March decline was also below the 97,300 drop in unemployment reported in March 2003.

The rise in seasonally adjusted unemployment came from an increase of 31,000 in western Germany and 13,000 in the formerly communist eastern part of the country.

Unemployment currently stands at 8.7 percent in the west and 19.2 percent in the east.

On a European harmonised basis, the pan-German unemployment rate was unchanged at 9.3 percent.


Subject: German news