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Economy in Brief

Slovakia Employment Firms in September; Former Soviet-Bloc Nations Show Irregular Progress 15 Years Later
by Carol Stone November 10, 2004

Last night was the 15th anniversary of the fall of the Berlin Wall. Yesterday's (November 9) Wall Street Journal included a major article arguing that the resulting reunification of Germany had not brought the anticipated surge of economic benefits to that nation, but that other Central and Eastern European countries had done better.

Some recent measures of economic activity tend to bear this out, although the evidence is not clear. Most simply, data histories are short for many of these nations, rendering exact comparisons virtually impossible. Tomorrow, November 11, Germany will report its 3rd quarter GDP and the "newer" nations will come some weeks from now. Through the second quarter, it was certainly the case that over recent years, these other countries -- the Czech Republic, Poland, Hungary, and so on -- have had faster growth rates than Germany; we can comment more tomorrow on this development.

Today, though, we have employment data through September for Slovakia, so we can make some limited comparisons about job growth. Data for "industry", which includes manufacturing, mining and utilities, extend back to 2000. For some other categories of business, they begin in 2001. Over the last year, "industry" jobs have grown at about a 1-1/4% pace. Total "registered employment", encompassing "industry" and private services, is expanding at about 1-1/2%. In Germany, jobs in the "total economy" are increasing, but only at about 0.2% in the second and third quarters over respective year-ago periods. Jobs in Germany's industrial sector, "Industry excluding Construction", have been declining noticeably, through the 2nd quarter by 2.2% from a year ago.

These partial data indicate that Slovakia has a more vigorous economy at present than Germany. But this is not the whole story. As seen in the table below, there was a notable slump in total jobs in Slovakia during 2002 and 2003 which was more severe than in Germany. A similar pattern is evident in neighboring Poland, a country held up in the Wall Street Journal as the more vigorous counter-example to Germany's unexpected post-Unification slowness. Through the second quarter, total employment in Poland is barely increasing from year-earlier levels; however, private sector jobs have been advancing at about a 2.5% pace. This is quite favorable, but it also follows a deep decline in the private sector during 2002 and most of 2003.

These jobs data suggest that economic progress in the recently freed Soviet bloc is occurring, but in fits and starts. Such swings are hardly surprising as those nations work to restructure their economic systems and their incentive structures. No one said this would be easy.

Millions Sept 2004 2nd Qtr 2004 Year/Year 2003 2002 2001
Slovakia: Total 1.248   1.5 -4.3 -1.3 NA
   "Industry" 0.571   1.1 0.5 0.2 1.0
Poland: Total   13.682 0.2 -1.2 -3.0 -2.2
   Private Sector   9.458 2.4 -0.8 -3.7 2.0
Germany: Total 38.543* 38.338 0.3* -1.0 -0.6 0.4
   "Industry ex Construction"   7.953 -2.2 -2.7 -2.2 0.1
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