R 051540Z FEB 09
FM AMEMBASSY BERLIN
TO SECSTATE WASHDC 3233
INFO DEPT OF LABOR WASHINGTON DC
DEPT OF TREASURY WASHINGTON DC
EU MEMBER STATES
FRG COLLECTIVE

UNCLAS BERLIN 000154 
 
 
STATE FOR DRL/ILCSR AND EUR/AGS 
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 TWICE AS HIGH AS EXPECTED IN JANUARY 
 
¶1.  Summary: The global economic crisis has hit the German labor 
market with the speed and power of a Tsunami, exceeding even the 
most pessimistic forecasts of many economists.  German 
unemployment rose almost twice as much as forecast in January as 
the economic downturn spread to industries from automotive to 
software to banking.  Whether the German governmentQs second 
economic stimulus package worth 50 billion euros ($66.5 billion) 
over the next two years can offset the expected economic 
contraction is uncertain.  The extension of the short-time 
employment benefits program to 18 months might provide some 
cushion, but if the economy does not pick up during the second 
half of 2009, as many economists expect, the monthly news from 
the German labor market will go from bad to worse.  End Summary. 
 
¶2.  Germany unemployment rose twice as high as expected in 
January, adding to the already negative news coming from all 
sides of the economy.  In addition to the recession, very cold 
temperatures had a noticeable effect on outdoor occupations. 
The number of people out of work rose in seasonally adjusted 
terms by 56,000 to 3.27 million, after an increase of 18,000 in 
December.  The adjusted jobless rate rose 0.1 percentage point 
to 7.8 percent.  The politically more important seasonally non- 
adjusted unemployment figure (the one that makes the headline 
news) surged by 387,000 to 3.489 million, pushing the 
unemployment rate to 8.3 percent.  This was third straight 
month-to-month rise and the sharpest increase in nearly four 
years.  The head of the Federal Employment Agency, Frank-Juergen 
Weise, said the economic downturn had finally reached the labor 
market, as reflected in the three most important employment 
indicators: 1. rising unemployment, 2. declining employment 
subject to social insurance contributions, and 3. declining 
demand for labor. 
 
¶3.  The number of workers taking advantage of so-called short- 
time work benefit (Kurzarbeit) programs jumped to 404,000 in 
December, up by 240,000 from the previous month.  However, the 
steep month-to-month increase was nevertheless a ray of hope 
that companies wanted to keep their staff on pay rolls.  (Note: 
As part of its efforts to stimulate the economy, the German 
government has extended the QKurzarbeitQ program whereby it pays 
subsidies to companies if they keep their staff.  The program is 
now valid for 18 month; the government hopes that the economic 
downturn will be over by then and companies will be able to 
resume normal operations.) 
 
¶4.  The sharp decline in the economy has also slowed employment 
growth and reversed the gains made in recent years as solid 
economic growth and labor market reforms helped to boost hiring. 
German employment hit a record 40.3 million in 2008, reaching 
the highest level since German unification in 1990.  Since then, 
however, the global slowdown has become increasingly visible as 
reflected by a series of announcements about planned layoffs, 
canceled shifts, and productions cuts by major companies such as 
Chemical Giant BASF and carmakers such as Volkswagen AG and BMW 
as they struggle to cope with the sharpest economic downturn 
since World War II.  Equally concerning, the number of jobs 
paying into GermanyQs social security system dropped for the 
first time in three years, by 105,000. 
 
¶5.  More detailed statistical information for all of Germany is 
available at the Federal Employment AgencyQs website: 
http://www.pub.arbeitsagentur.de/hst/services /statistik 
 
KOENIG