German unemployment approaching post WWII high

[Col. Crackpot]

linky

European Economies: German Jobless Rise to Record (Update3)
Feb. 2 (Bloomberg) -- German unemployment jumped to the highest since World War II as new rules added welfare recipients to the jobless register, clouding the outlook for Chancellor Gerhard Schroeder in elections this month.

The number of people out of work in January rose by 227,000 to 4.71 million in seasonally adjusted terms, including 230,000 new jobless claimants, the Nuremberg-based Federal Labor Agency said today. The adjusted unemployment rate rose to 11.4 percent, a seven-year high, while the unadjusted jobless total passed 5 million for the first time since the war.

Schroeder's government had cut jobless benefits and forced claimants to take low-paid jobs in an attempt to get more people into work in Europe's largest economy. The chancellor was campaigning today in Schleswig-Holstein, where his Social Democratic Party is trying to hold on to power in the Feb. 20 state elections.

``The psychological significance of 5 million unemployed could be very damaging for the government,'' said Hans-Juergen Hoffmann, managing director of Hamburg-based opinion-research company Psephos GmbH. ``The rise in unemployment will make the campaign more difficult.''

Schroeder told reporters in Husum in Schleswig-Holstein that today's figures were ``depressing, but they are honest.''

`Five Million Reasons'

Economy and Labor Minister Wolfgang Clement told a news conference in Berlin the unemployment report provided ``5 million reasons for labor-market reform.'' He said he expects a further rise in unemployment in February, though experience from other countries suggests the new policies may eventually cut the jobless total by as much as 20 percent.

Even before the labor-market changes, German unemployment had risen for 11 straight months, as companies moved jobs to countries with lower labor costs and stagnant domestic demand deterred hiring. Retail sales fell for a third month in four in December, the Federal Statistics Office said today.

``Overall, the labor market remains fundamentally weak,'' said Dario Perkins, an economist at ABN Amro Holding NV in London. Even though the changes may push those now on the jobless register to take low-paid jobs, that won't improve Germany's ``severe consumer depression and hopeless domestic demand growth.''

Germany's rising unemployment contrasts with the U.S., where the jobless rate probably remained unchanged at 5.4 percent in January as 200,000 jobs were created outside farming, a Bloomberg survey of 70 economists showed. The Labor Department releases the report Friday.

Elsewhere in Europe

In December, Germany had the second highest unemployment rate after Spain among the 12 countries that share the euro, at 10 percent on a comparable basis. The rate in France was 9.7 percent. In the U.K., the latest available comparable rate is 4.6 percent for October.

The German jobless statistics now include all recipients of what is known as unemployment benefit II, paid to those without a job for more than a year as well as people such as single mothers and low wage-earners who used to receive social-welfare payments and did not have to register at job centers. All those on the new benefit who can work at least three hours a day are counted as jobseekers and face benefit cuts if they reject job offers.

`Not the End'

Disregarding the effects of the new labor law, seasonally adjusted unemployment was ``stable,'' Labor Agency Vice-President Heinrich Alt told a news conference in Nuremberg. Still, another 70,000 social-welfare recipients have yet to be included in the statistics, he said, adding ``this is not yet the end of the development'' and that the jobless total has not yet peaked.

Economists had expected the unadjusted jobless total to increase 150,000, the median of 23 forecasts in a Bloomberg survey showed. The adjusted unemployment rate is higher than it has been since March 1998, when it was 11.5 percent. The record rate was set in October 1997 at 11.8 percent.

Schroeder's party must contest two regional polls this year before the next national election in 2006. After Schleswig- Holstein, it's the turn of Germany's most populous region, North Rhine-Westphalia, on May 22.

Schroeder, 60, won a second four-year term in September 2002 by the narrowest margin in any postwar election in Germany. The Social Democrats' opinion-poll ratings then slumped, as the government introduced policy changes that made it easier for companies to fire staff, cut welfare benefits and increased health- care costs.

The latest measures are taking effect just as support for Schroeder's coalition of Social Democrats and Greens has recovered, rising above that for the main opposition parties for the first time since October 2002.

Poll Findings

Backing for the coalition between Jan. 17 and Jan. 21 rose 1 percentage point from a week earlier to 46 percent, according to a poll of 2,499 voters conducted by Forsa for Stern magazine and RTL television. The opposition fell 1 point to 45 percent. The poll, which had a margin of error of plus or minus 2.5 percentage points, was published Jan. 26.

In the last nationwide elections -- to the European Parliament in June -- the coalition attracted just 33.4 percent of the vote, compared with the opposition's 50.6 percent.

Schroeder can expect ``only a small positive impact from the labor-market reform in 2005,'' said Juergen Michels, an economist at Citigroup Global Markets in London, in a note to investors. ``But over time, the tighter eligibility criteria for receiving unemployment benefits and the cut in the duration in unemployment benefits will increase incentives to accept jobs.''

To help get people back into work, Germany's municipalities and job centers plan to place as many as 600,000 long-term unemployed in jobs that pay 1 euro ($1.30) or 2 euros per hour in addition to unemployment benefits. One-euro jobbers, who are not counted as unemployed, work as many as 30 hours per week in occupations such as cleaning parks and public buildings.

`Hidden' Jobless

Bert Ruerup, the designated head of Schroeder's council of economic advisers, said an additional 1.5 million unemployed are ``hidden'' in early retirement programs, training measures and subsidized work.

``Unemployment has grown steadily over the last three decades and then reunification came on top of that,'' Ruerup told Deutschlandradio today. ``There is no silver bullet for the reduction of unemployment and if anybody claims this can be done quickly then that's simply false.''

While the German economy resumed expansion in 2004 after three years, there's been no corresponding growth in job numbers.

Growth Forecast

The government last week pared its forecast for economic growth in 2005 to 1.6 percent from 1.7 percent. That's too little to boost the hiring of full-time workers who also contribute to the social-security system.

Germany is losing 1,200 full-time jobs a day, Juergen Thumann, head of the BDI industry federation, said last week. Unemployment won't decline unless taxes and labor costs are cut, he said.

Siemens AG, Germany's largest engineering company, plans to shed about 700 jobs at its fixed-line networks unit in Munich and Berlin, the company said Jan. 28. T-Mobile International AG, Deutsche Telekom AG's wireless unit, plans to eliminate as many as 1,200 jobs in Germany by the end of 2006 to cut costs.

``The modest economic recovery hasn't reached the labor market yet,'' said Andreas Rees, an economist at HVB Group in Munich. He said 2.75 percent growth is needed to create full-time jobs in Germany, ``so job losses will continue until the second half of the year.''

wow, and to think we complain about our relatively paltry 5.4% unemployment rate.

[Steven Snyder]

Meh...they just need more prostitutes. I think opening a few hundred brothels would do wonders for tourism and boost employment.