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Thursday, October 09, 2003

German Unemployment Improves

By rights I should be getting ready to don my 'sackcloth', all the pundits seem to buy the German recovery argument. These employment numbers are certainly better than expected. There is however the small question of how the reforms may be reducing the number of people entitled to benefit. At the end of the day, I fear we may still have a long hard winter out there in front of us.

Unemployment in Germany, Europe's largest economy, unexpectedly fell in September, stoking optimism that the country is pulling out of a recession in the first half. The number of people out of work dropped a seasonally adjusted 14,000 from August to 4.39 million, the Federal Labor Office said in Nuremberg. Economists surveyed by Bloomberg News had expected an increase of 7,000. The jobless rate fell to a seven-month low of 10.5 percent from 10.6 percent. German business confidence rose to the highest since April 2001 last month, the Ifo institute's survey showed. The benchmark DAX stock index has risen 17 percent this year as investors bet on a recovery. Manufacturers unexpectedly received more orders in August as export demand rose, a report on Tuesday showed. "The worst of the slump is definitely behind us now,'' said Klaus Hofer, head of personnel at B. Braun Melsungen AG, a chemical supplies company based north of Frankfurt, with 8,500 workers in Germany. "We still have a few vacancies to fill.'' Infineon Technologies AG, Europe's No. 2 chipmaker, is hiring 145 software engineers from Siemens AG's Information and Communication Mobile wireless communications unit to help expand its telecommunications and services offerings. Business confidence in September rose to the highest since April 2001, driven by future expectations, the Ifo economic institute said last month. Investor confidence gained for the ninth month in September, the longest period of back-to-back gains since 1993, the ZEW institute said.

The unemployment rate, adjusted for European Union standards, was unchanged at 9.4 percent. In August, that was the second highest rate in the dozen countries sharing the euro after Spain. The U.S. jobless rate was unchanged at 6.1 percent in September.

September's unemployment figures were helped by changes the government has made to curb the number of people eligible for benefits, the Federal Labor Office said in a statement.

To improve conditions for hiring, Schroeder has also converted job centers into temporary employment agencies and introduced funding for jobless who set up their own companies.

The Labor Office said 21,000 people without work have been moved into temporary employment this year while 62,000 jobless have set up their own business, subjecting their income to a 10 percent standard tax. Some German companies are hesitating to hire. Juergen Strube, supervisory board chairman of chemicals maker BASF AG yesterday said ``the recovery has not yet materialized.'' Juergen Hambrecht, the company's chief executive officer, told the Tagesspiegel newspaper on Sept. 29 he ``certainly'' won't add any jobs in Germany. The number of people out of work in western Germany, which accounts for more than 90 percent of national output, fell by a seasonally adjusted 11,000, while the number of people out of work in eastern Germany fell by 3,000, the Federal Labor Office said.
Source: Bloomberg

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