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Germany

Opinion: Drop in Unemployment a Temporary Snap-Shot

The number of unemployed people in Germany has sunk below three million for the first time since November 1992. But although it's a nice snap-shot, the worst is yet to come, says DW's Rolf Wenkel.

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Despite the financial crisis and an economic slowdown, the number of people without jobs in October decreased by 84,000 to 2.997 million. In comparison to September, the unemployment rate sank by 0.2 percent to 7.2 percent, according to a statement from the Federal Employment Office that was released in on Thursday, Oct. 30 in Nuremberg.

Rolf Wenkel

The job market statisticians have provided us with some good news: For the first time in 16 years, the number of unemployed people has dipped below the symbolic number of three million. But experts predict this will be the last positive surprise that can be expected from the job market for a long time. After all, the job market has a delayed reaction of several months when it comes to economic changes. Everyone is saying that the financial crisis will spill over into the real economy. The economics research institute and the economics minster have drastically lowered their growth prognoses. This surely holds consequences for the employment market.

The only question is how serious the impact will be. In the best-case scenario, the impressive job creation of recent years will simply come to a stand-still and the unemployment rate will stagnate. In the worst-case scenario, reduced working hours, which are now being implemented in the automobile industry, won't do the trick. If companies have their backs up against a wall, jobs will be cuts and the unemployment rate will increase significantly once again.

But there's a lot to be said for the fact that the German job market is better equipped for a dreary global economic condition this time around. In the past, each external shock on the job market would mean another blow to unemployment. As much as some unions and socio-politicians may despise them, the job market reforms from the 2010 agenda have made the German employment market significantly more robust and flexible – and they've paved the way for impressive success. Almost 250,000 new jobs have been created since 2004, and by no means only in the low wage sector. Unemployment decreased by 22 percent between 2004 and 2007. The cost of unemployment for public funds decreased in the same time period to just under 25 million euros ($31.7 million), or 27 percent.

A demographic factor also comes into play: Germany is getting older and fewer new generations are coming out of schools and universities. In this year alone, approximately 80,000 fewer people entered the job market as in the previous year. Many went into retirement. The Nuremberg Institute for Job Market and Career Research estimates that this number will be at 130,000 next year. That's a number which significantly reduces the size of the job market, even if the financial crisis penetrates the real economy harder than we can imagine it doing today.

And there is another argument that suggests the looming recession might only put a small damper on the job market. The lack of skilled workers has persuaded many companies to rethink their strategies. They now think similarly to the way medium-sized machine manufacturers have been for a long time. These manufacturers have been used to extreme economic vacillations in their branch for years and carry their employees with them through bad times because they know that when things improve, they'll need their workers again. Those who are quick to lay-off employees will have difficulties later, because skilled workers are both costly and difficult to find. Perhaps this can also be a model for the future of listed companies in the course of the cleanup following the financial crisis. This could be a time when disastrous things like Shareholder Value and pure thought in the quarterly results are challenged and neatly trimmed down. In any case, it would be nice.

Rolf Wenkel is a business editor for DW-RADIO (ls).

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