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Economy in Brief

German Labor Market Remains in the Doldrums
by Carol Stone September 2, 2004

The German Federal Statistics Office and the Bundesbank today reported continuing lackluster labor market conditions in that nation. Employment in June edged down by 1,000, while unemployment rose in August by 24,000. The August unemployment rate for Germany as a whole held at July's 10.6% as the rate in West Germany ticked up to 8.6%, a new high in the current cycle. The rate in East Germany remained at 18.5% for a fourth straight month.

About ten days ago in this space, Louise Curley described the labor reforms presently in process in Germany. She argued that these extensive structural changes, desirable though they are for the long-run health of the German economy, had likely been a restraint on domestic demand there in the second quarter. The still lower employment figures for June seem to underscore that tendency, and the behavior of the unemployment rates so far in the third quarter suggest that things have not improved much over the summer. One might take heart in the minimal size of the employment decrease in June and see it as a sign that jobs are stabilizing. In fact, some market forecasts had looked for a larger decline. At the same time, a larger forecast survey had pointed to a much smaller increase in August unemployment than occurred. This development, along with higher energy costs, makes it difficult to be optimistic about renewed vigor in the German economy anytime soon.

Jun 04 May 04 Jun 03   M/M   Y/Y 2003 2002 2001
Employment (thous, SA)   38204   38205 38293 -1K   -89K   38316   38699   38923  
Unemployment Rates (%, SA) Aug 04 Jul 04 Aug 03
All Germany   10.6 10.6 10.6 +24K* +11K* 10.5 9.8 9.4
West Germany   8.6 8.5 8.4 +18K* +26K* 8.4 7.7 7.2
East  Germany   18.5 18.5 18.5 +6K* -15K* 18.5 17.7 17.3
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