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Tuesday, March 31, 2009

Unmployment Rises In Germany

German unemployment rose once more in March as both foreign and domestic demand weakened, leading companies to face growing pressure to make layoffs. The number of people out of work rose by a seasonally adjusted 69,000 to 3.4 million. The adjusted jobless rate rose to 8.1 percent from 8 percent in February. Germany’s ILO compatible jobless rate rose to 7.4% in February from 7.3 percent in January.

German unemployment began to increase in November after falling steadily for more than three years. The jobless total may increase by an unadjusted 430,000 to 3.7 million this year, the Labor Agency’s IAB forecasting unit said on March 24. The projection assumes an economic contraction of 3.5 percent. The final number may be even higher, according to the agency’s President Frank-Juergen Weise, who said in an interview that he won’t exclude the unadjusted total rising to 4 million by the end of the year.

The labor provisions allow companies to reduce workers’ hours and pay while keeping them on payrolls and the labor agency tops up pay packets. In January the programme was extended to 18 months from six months for each individual worker, and last week Angela Merkel's Christian Democratic Union of chancellor Angela Merkel proposed the government extend the maximum duration of the short-shift scheme from 18 to 24 months. In February alone, 17,000 companies applied for the scheme for 700,000 workers.

At the same time the number of persons employed in the German economy seems to have peaked and in Fenuary the total was 39.81 million, an increase of just 31,000 persons or 0.1% on February 2008. Hence, the employment increases registered in the first half of last year have now more or less been cancelled out by the monthly decreases that have been seen since November, and we now begin to enter decrease territory.

Compared with January, the number of persons in employment was down by 14,000. That decrease, which seems moderate considering the economic crisis, is perhaps better put into perspective when taking into account the average trend of employment figures in any February of the last ten years.

A negative employment trend is also revealed when you strip out typical seasonal variations. Compared with the previous month, the seasonally adjusted result decreased by 13,000 to 40.20 million persons in employment in February 2009.

The Contraction In German Services Slows Slightly

The German services purchasing managers index edged up in March after falling to a record low in February. However, with the PMI still only marginally higher than February's level, activity in the services sector continued to fall at sharp rate in the month, according to Markit Economics.

The German services PMI increased to 42.3 in March, up from both the advance estimate of 41.7 and February's 41.3 level, Markit reported on Friday.

According to the PMI survey respondents, general demand in the services sector remained at weak levels, as reflected in new business falling for the seventh consecutive month. New orders also continued to lose ground in March.

Excess capacity and a lack of new work allowed firms to further reduce their work backlogs and forced them to cut their workforce levels for the second month in a row. "However, the rate of job shedding was only modest, easing on the pace seen in the previous month" Markit noted.

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