Jobless rise dents hopes of recovery for Germany

Click to follow
The Independent Online

An unexpected surge in German unemployment last month dented hopes that Europe's largest economy had finally turned the corner after three years of stagnation.

An unexpected surge in German unemployment last month dented hopes that Europe's largest economy had finally turned the corner after three years of stagnation.

Almost 100,000 Germans were thrown on the dole as the jobless total hit 4.35 million, or more than a 10th of the workforce, government figures showed yesterday. The news took the shine off separate figures showing that factory orders had surged by 2.3 per cent in the month of June. The increase was much better than a forecast 0.8 per cent fall but still left the second quarter 1.9 per cent down on the previous three months.

The government conceded it would fail to achieve its promise to bring down Germany's high unemployment rate. It said the number of people out of work would average about 4.4 million this year - compared with 4.06 million last year.

Wolfgang Clement, the Labour Minister, tried to put a brave face on the news, saying the economic downturn in Germany had probably bottomed out. "The economy is emerging from a trough, but growth is still too weak to relieve labour market conditions," he said.

Unemployment usually increases during the summer as school-leavers sign on for the first time but even the seasonally adjusted figures showed dole queues rose by 7,000 to take the rate to 10.6 per cent.

The Federal Labour Office said the figures would have looked even worse without the early impact of the labour market reforms being pushed through by Chancellor Gerhard Schröder. He also has proposed advancing by a year €15.5bn (£10.5bn) of tax cuts that were planned for 2005.

However, Thorsten Fischer, an economist at the online analysts economy.com, said: "The great danger remains that the government has exhausted its enthusiasm for reform and that gridlock prevents further reform until elections are held in [autumn] 2006."

Looking ahead to 2004, key sentiment indicators have improved and the Ifo index has risen for the past three months in a row, usually seen as a signal that an upturn is on the way.

The picture contrasts starkly with the UK, which is enjoying record employment and the lowest jobless total since records began almost 20 years ago.

Meanwhile, a report yesterday by the Recruitment and Employment Confederation showed the number in permanent jobs rose for the second month running in July.

Comments