Cablegate: German Unemployment Rate Remains Steady

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R 031224Z SEP 09
FM AMEMBASSY BERLIN
TO SECSTATE WASHDC 5071
INFO DEPT OF LABOR WASHINGTON DC
DEPT OF TREASURY WASHINGTON DC
EU MEMBER STATES
FRG COLLECTIVE

UNCLAS BERLIN 001068

STATE FOR DRL/ILCSR AND EUR/CE (SCHROEDER)
LABOR FOR ILAB (BRUMFIELD) AND BLS (SORRENTINO,
PSB 2150)
TREASURY FOR OASIA

E.O. 12958: N/A
TAGS: ELAB ECON EFIN PGOV GM
SUBJECT: GERMAN UNEMPLOYMENT RATE REMAINS STEADY

1. SUMMARY. There were once again mixed signals
from the German labor market in August.
According to the Federal Employment Agency, the
number of seasonally adjusted unemployed in
Germany which reflects the overall trend in the
labor market fell very slightly(by 1,000) in
August; the rate, however, remains at 8.3. The
small decline sharply contrasts with the 30,000
increase predicted by many economists.
Seasonally non-adjusted unemployment rose 9,000
from July to 3.472 million and is now also at 8.3
percent. The impact of the economic crisis on
the German labor market has been dampened by
employers' use of a subsidized shorter work hour
program instead of layoffs. Nevertheless, there
is general consensus that job losses are likely
to accelerate in the coming months and
unemployment is still expected to top 4.5 million
in 2010. END SUMMARY.

2. The latest labor market development in August
once again raised (maybe unduly) hopes that the
recession was easing. Four weeks before the
federal elections at the end of the month, the
politically important seasonally non-adjusted
unemployment figure (the one that makes the
headline news) rose only by 9,000 from July to
3.47 million, representing an unemployment rate
of 8.3 percent. Due to the German government-
subsidized "short shift" work program and
statistical changes, seasonally adjusted
unemployment unexpectedly declined by 1,000
during the same period. The month-to-month
jobless decrease was well below the 30,000
increase forecasted by many economists.

3. The BA warned, however, that the improved
jobless figures were also attributable to recent
changes in the compilation of unemployment
statistics. Under the new methodology, people
seeking employment through private placement
agencies or receiving retraining within companies
are no longer counted as unemployed. Without the
changes, the number of jobless would have been
around 25,000 higher in August, the BA noted.
Other measures, such as the major use of the
"short shift" work program, have helped to
prevent massive job cuts in Germany.

4. Employment Agency Chief Frank-Juergen Weise
reported in his press conference that the effect
of the recession on the German labor market had
not yet been "dramatic" so far. Given the
relatively favorable labor market data in recent
months, Weise was cautiously optimistic that the
economic crisis would not hit the labor market as
hard as expected, indicating that unemployment
might not reach the expected 4 million mark by
the end of the year. Nevertheless, he warned
against premature "euphoria," and noted that
unemployment would definitely jump in 2010, but
stay well below 5 million. In his view, the
"most dangerous month" in this scenario would be
January 2011 when the short time work program
will expire. Economists also warned that changes
in the labor market traditionally lag other
macro-economic indicators which recently showed
signs that the worst of the recession may be
over. In a press interview, Ralph Solveen, an
economist at Commerzbank said although the August
figures were "a positive surprise" and the feared
collapse in the labor market did not happen, "it
will certainly hit in the fall."

5. The sharp deterioration of the German economy
has also slowed employment growth and reversed
recent year gains. German employment was at
40.15 million in July 2009, about 144,000 less
than a year ago. Germany's export-oriented
economy (notably automobile and machine tool
industries) remains affected by waning global
demand for manufactured products.

6. More detailed statistical information on
Germany is available at the Federal Employment
Agency's website:

http://www.pub.arbeitsagentur.de/hst/services /statistik

MURPHY

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