R 301451Z JUL 09
FM AMEMBASSY BERLIN
TO SECSTATE WASHDC 4735
INFO DEPT OF LABOR WASHINGTON DC
DEPT OF TREASURY WASHINGTON DC
EU MEMBER STATES
FRG COLLECTIVE

UNCLAS BERLIN 000910 
 
 
STATE FOR DRL/ILCSR AND EUR/CE (SCHROEDER) 
LABOR FOR ILAB (BRUMFIELD) AND BLS (SORRENTINO, 
PSB 2150) 
TREASURY FOR OASIA 
 
E.O. 12958: N/A 
TAGS: ELAB ECON EFIN PGOV GM
SUBJECT: MIXED SIGNALS AGAIN FROM THE GERMAN 
LABOR MARKET 
 
¶1.  SUMMARY.  There were once again mixed signals 
from the German labor market in July.  According 
to the Federal Employment Agency, Germany's non- 
seasonally adjusted unemployment increased by 
52,000 from June to July (with the rate 
increasing by 0.1 percentage point to 8.2 
percent), less than most economists had expected. 
Seasonally adjusted unemployment, which reflects 
the overall trend in the labor market, decreased 
unexpectedly by 6,000 to 3.545 million.  In 
recent months, economists have been regularly off 
the mark on their predictions on German jobless 
data, but there is general consensus that job 
losses are likely to accelerate in the coming 
months and unemployment to rise over 4.5 million 
in 2010.  END SUMMARY. 
 
¶2.  German unemployment increased less than 
expected in July, raising (maybe unduly) hopes 
that the recession was easing.  Two months before 
the federal elections in September, the 
politically important seasonally non-adjusted 
unemployment figure (the one that makes the 
headline news) rose by 52,000 from June to 3.45 
million, for an unemployment rate of 8.2 percent. 
However, the month-to-month increase was only 
about half of what most economists had predicted 
for July.  Influenced by Germany's government- 
subsidized "short shift" work program and 
statistical changes, seasonally adjusted 
unemployment unexpectedly declined by 6,000 
during the same period.  The month-to-month 
jobless decline was well below the 45,000 
increase forecasted by many economists. 
 
¶3.  The BA warned, however, that the improved 
jobless figures were also attributable to recent 
changes in the compilation of unemployment 
statistics.  Under the new methodology, people 
seeking employment through private placement 
agencies or receiving retraining within companies 
were no longer counted as unemployed.  Without 
the changes, the number of jobless would have 
been around 30,000 higher in July, the BA said. 
Other measures, such as the major use of the 
"short shift" work program, have helped to 
prevent massive job cuts in Germany.  Note: 
Overall, unemployment has risen by only 300,000 
since the global financial and economic crisis 
intensified with the collapse of U.S. investment 
bank Lehman Brothers last September. 
 
¶4.  Employment Agency Chief Frank-Juergen Weise 
noted in his press conference that the effect of 
the recession on the German labor market was 
still "moderate" so far.  In addition to short 
shift regulations, demographic factors such as 
the decline of the workforce by 152,000 during 
the year have played a role.  Despite the 
unexpectedly favorable labor market data in June 
and July, Weise warned against a premature 
"euphoria."  He could not rule out that 
unemployment would reach 4 million by the end of 
the year, some 800,000 more than at the end of 
¶2008.  Economists also warned that changes in the 
labor market traditionally lag other macro- 
economic indicators which recently showed first 
signs that the worst of the recession might be 
over.  In a press interview, Eckart Tuchtfeld, an 
economist at Commerzbank, said he expected 
unemployment to peak in the coming year.  "When 
the subsidies (under the short-time work) run 
out, unemployment is likely to jump," he said. 
 
¶5.  The sharp deterioration of the German economy 
has also slowed employment growth and reversed 
recent year gains.  German employment was at 40.2 
million in June 2009, about 92,000 less than a 
year ago.  Germany's export-oriented economy 
(notably automobile and machine tool industries) 
is increasingly affected by waning global demand 
for manufactured products. 
 
¶6.  More detailed statistical information on 
Germany is available at the Federal Employment 
Agency's website: 
 
http://www.pub.arbeitsagentur.de/hst/services /statistik 
 
 
BRADTKE