So while an increasing volume of data suggest confidence across Europe is stabilizing and the recession slowing, the continued increase in unemployment may well weaken consumer spending and help prolong the recession. And with PMI surveys showing the employment output as bleak both in the service and manufacturing industries further increases in unemployment now seem inevitable.
Job Creation Turns Negative In March
The number of those employed in Germany was down year on year in March for the first time in several years. According to provisional results from the Federal Statistical Office total March employment in Germany was 39.89 million - a decrease of 46,000 (–0.1%) on a year earlier. The last time the number of persons in employment decreased from the same month a year earlier was in February 2006.
Generally employment increases in March due to the usual spring rebound in economic activity. Over the last three years employment was up by an average 138,000 persons from February. This March, however, the increase was only 53,000 (+0.1%). The Federal Statistics Office noted that the significant extension of the short-time work probably rescued the numbers from being even worse.
Seasonally adjusted the total number of employed was 40.18 million in March, a seasonally adjusted decrease by 27,000 persons (–0.1%) on February.
In Labour Market Terms The Worst Is Far From Over
The German economy is still in a serious rcession, with exportslikely to be down by 23 percent in 2009 according to the country’s leading economic institutes. As such it is clear that the contraction “is consuming the usual spring rebound in the labor market,” as Labor Agency President Frank-Juergen Weise put it last week. German unemployment has now beenn increasing since last November after falling steadily for more than three years. The economy is expected to lose some 50,000 jobs per month on average this year, according to the most recent government estimates, and this despite programmes which allow companies to keep workers on their payrolls when orders are slack. Some 24,000 companies with 650,000 workers signed up to the programme in Marcg, around 7,000 companies more than in February, according to the Labor Ministry data.
The German government has so far implemented two economic stimulus programs, amounting between them to €80 billion, or 3.2% of GDP, of which 1% of GDP has its effect in 2009. At first glance, this is indeed less than the American program, which totals 6.2% of GDP, of which 2% will be spent in 2009, but the built-in flexibility of German'd extensive social-welfare system also needs to be taken into account.
The German state recorded a budget deficit of just 0.1% of GDP in 2008, but this, according to a recent OECD forecast, will soar to 4.5% of GDP in 2009. Thus, the economic stimulus provided by the German state budget will amount to something like 4.4% of GDP in 2009.
According to the OECD, the annualized flow of German goods exports from January 2008 to January 2009 declined by $173 billion more than the corresponding flow of imports fell, which means that Germany’s annualized trade surplus fell by the same amount. This is the strongest decline in net foreign demand facing a single country, or, equivalently, the strongest increase in a country’s net demand for foreign goods. Japan, for example, has confronted only a $157 billion decline in its annualized trade balance, while China’s annualized trade surplus increased by $249 billion. In other words, from January 2008 to January 2009, China withdrew $249 billion in annualized demand from the world economy, whereas Germany soaked up a $173 billion net decline in external demand and Japan a $157 billion one.