Tuesday June 30, 12:13 PM
Warnings of worse to come in German labour market
By Aurelia End
BERLIN (AFP) - German unemployment edged lower in June according to official data released on Tuesday, but the global recession will soon take a toll on jobs in the biggest European economy, analysts warn.
The rate of unemployment edged down to 8.1 percent of the workforce from 8.2 percent in May, unadjusted figures from the labour office showed, with the total jobless number reaching 3.410 million, the lowest since December.
The politically sensitive figure for the number of jobseekers declined by 48,000 from May, largely due to summer weather creating more construction jobs. Compared to June 2008 the number was up 250,000.
On a seasonally adjusted basis, the measure preferred by economists, the number of German jobless rose by 31,000 in May, less than an analyst forecast of 50,000.
The smaller-than-expected rise was mainly a result of the labour office's new definition of job seekers however, which excludes those who are unemployed but participating in new training programmes.
The seasonal effect on construction activity was "less strong than in previous years" amid the worst German recession since World War II, the labour office said.
In previous years, the summer boost has typically added around 80,000 jobs, almost double the amount seen this year.
German Labour Minister Olaf Scholz said in a statement that the figures should be treated with caution, and warned that "this summer we are getting into troubled waters. We must be ready to hold the tiller firmly."
The labour office said meanwhile that a strong recourse by companies to cut working hours -- subsidised by the government -- rather than lay off employees had "softened the effect of the crisis on the labour market."
ING senior economist Carsten Brzeski said what is now a "summmer breeze could be followed by a thunderstorm" in the autumn, when "German unemployment could explode."
Analysts expect German companies to start laying off workers soon, and some see unemployment climbing as high as 13 percent by mid-2010.
"A further increase in unemployment seems inevitable. The next few months could prove to be crucial for the labour market," Brzeski noted.
German authorities expect the economy to contract by six percent this year, its biggest slump in more than six decades because foreign demand for German goods has dried up.
Production in the crucial manufacturing sector is down by nearly 25 percent from its peak in early 2008, meaning there is massive surplus capacity that will force companies to lay off staff even as the economy begins to recover.
"The outlook for the German labour market remains gloomy," said economist Costa Brunner at Natixis (Paris: FR0000120685 - news) . "The aftermath of the shock in demand is expected to intensify."
For UniCredit counterpart Alexander Koch, the weaker than normal jump at the start of the summer demonstrated that "the deep recession is taking its toll on the labour market."
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