German resists recession

January 5, 2010

, FRANKFURT, Jan 5 – German unemployment is rising, official data showed on Tuesday, but short-work schemes and start-ups might have averted a feared surge after the country\’s worst post-war recession.

Unemployment averaged 8.2 percent of the workforce in 2009, with a total of 3.42 million unemployed in Europe\’s biggest economy, the Federal Labour Agency said.

That was an increase of 155,000 from 2008, a trend mirrored in monthly data.

In December, German unemployment crept up to an unadjusted level of 7.8 percent from 7.6 percent the previous month, the agency said, while the raw number of jobless, the headline figure in Germany, climbed to 3.276 million.

"After three months of declining unemployment numbers, it was only a matter of time before German unemployment would increase again," ING senior economist Carsten Brzeski noted.

"Unemployment should continue to increase until mid-2010 and should peak at around 3.8 million," the economist forecast, well below the 5.2 million jobless generated by Germany\’s last recession in 2002-2003.

In addition to a short-time work scheme that has a million workers on state-subsidised reduced hour payrolls, official data shows that Germany benefitted from a net increase in new companies last year.

The IfM institute that follows small and medium-sized enterprises for the economy ministry said Monday that the economic crisis had spurred salaried workers who were laid off or who expected to be fired to start their own firms.

When adjusted for seasonal factors meanwhile, the number of unemployed in Germany fell by 3,000 in December, its sixth decline in a row.

"The labour market is very robust despite the deep recession," labour agency head Frank-Juergen Weise was quoted by a statement as saying.

Germany pulled out of its worst recession since World War II in the second quarter of 2009 but economic activity is nonetheless expected to have shrunk by almost five percent last year.

"German firms have learned the lesson of 2002/03 quite well, when premature redundancies caused a shortage of skilled labour in the ensuing upswing," said Timo Klein at IHS Global Insight.

The country\’s relatively rigid labour market and the government\’s boost thus appears to have averted an explosion in unemployment despite the slowdown, but "whether such a labour market can be a growth driver during the recovery is another story," Brzeski said.

The German data was also affected by an accounting change since May that does not consider those undergoing job training by private agencies as unemployed.

But the economy now has high excess capacity in the manufacturing sector that could prevent new jobs from being created even as global trade increases and order books fill up.

UniCredit economist Alexander Koch highlighted "a consumer recession around the corner" and a "subdued outlook for corporate investment," and estimated unemployment of close to four million this year.


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