Read news from:
Austria
SHARE
COPY LINK

ECONOMY

Economic downturn hits German job market

The global financial crisis has come to Europe's largest economy: German unemployment rose in December halting nearly three years of job creation, according to official figures released on Wednesday.

Published: 7 January 2009 10:47 CET
Economic downturn hits German job market
Photo: DPA

The number of people out of work in Germany rose by 114,000 in December to 3.1 million as the fallout from the economic downturn begins to be felt in the labour market, data from the Federal Labour Agency showed.

“2008 was the best year for the jobs market. Nevertheless, the December data show that the economic crisis has reached the jobs market,” the head of the Labour Agency, Frank Weise, said in a statement.

“As a result, our optimism for 2009 has also been dampened,” Weise added.

December’s unemployment rate rose by 0.3 points to 7.4 percent.

Even adjusted for seasonal fluctuations, unemployment in Europe’s biggest

economy rose by 18,000 from the level in November – the first such increase

since February 2006.

Following a surprisingly resilient performance in recent months, the positive trend in the German jobs market has now turned, the Labour Agency said.

Alexander Koch, an economist at Unicredit, said December’s data marked a “turning point” for Germany’s labour market and predicted more people would lose their jobs as the economy spirals deeper into recession.

“The trend reversal cannot be halted and the negative dynamic on the labour market should pick up considerable momentum in the further course of this year,” Koch said.

Germany is already in recession and is forecast to suffer its worst slump in the post-war period in 2009. In a bid to stave off the worst effects of the downturn, Chancellor Angela Merkel’s coalition is due later this month to launch a second stimulus package worth some €50 billion ($70 billion).

In mid-December, Weise told the magazine Focus that German unemployment could soar to 3.6 million within six months.

“By the second half of next year, it is possible, on the basis of current data, that the number out of work will reach 3.6 million,” he told the magazine.

For members

ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

SHOW COMMENTS