Unemployment in Germany Reaches Post-WWII Record

Unemployment in Germany rose to a post-World War II record of 12% and France’s jobless rate matched a five-year high, threatening prospects for economic growth in the dozen nations sharing the euro.The seasonally adjusted unemployment rate in Germany, Europe’s largest economy, climbed in March from 11.7% in February, the Federal Labor Agency said in Nuremberg yesterday.French jobseekers increased by 4,000, and the jobless rate held at 10.1% in February. Business and consumer confidence in the euro region dropped this month, a separate report showed.The lack of job creation is hindering consumer spending, the biggest part of the $10 trillion euro-region economy, and corporate investment. The European Central Bank this month reduced its 2005 growth forecast. Companies including Deutsche Bank AG, Nestle SA and Skis Rossignol SA are cutting jobs.“The labor markets are preventing consumers from spending,” said a Paris-based economist at Barclays Capital, Laurence Boone. “Overall, it’s quite difficult. Most business behavior across the euro region is ‘wait and see.'”Unemployment is undermining support for German Chancellor Schroeder and French President Jacques Chirac, according to opinion polls this week. It’s also stoking opposition in France to the European Union constitution, the object of a May 29 referendum.Germany and France have the highest unemployment among the Group of Seven industrialized nations, compared with Britain’s 4.7% and America’s 5.4%. The appreciating euro has raised costs for European exporters. Germany already has the second-highest labor costs, after Belgium, of the 30 countries in the Organization for Economic Cooperation and Development.An index gauging confidence among 35,000 executives declined to minus 8 in March, the lowest since December 2003, from -7 in February, the European Commission said in Brussels. Consumer confidence dropped to -14 from -13, a seven-month low.“We have no choice but to cut jobs,” Burkhard Schuchmann, chief executive officer of Vossloh AG, a German train equipment supplier, said in an interview. Vossloh, which employed 4,480 people at the end of 2004, plans to eliminate 180 jobs at its plant in the northern city of Kiel. “It is a necessary adjustment in an environment that has become more volatile.”Deutsche Bank, Germany’s biggest lender, Deutsche Telekom AG, Europe’s largest phone company, and Infineon Technologies AG, Europe’s no. 2 chipmaker, are among companies reducing their workforce in Germany or moving jobs abroad.With oil prices 63% higher than a year ago, the European Commission may also lower its 2005 growth forecast on April 4,according to Merrill Lynch & Company’s chief European economist, Ian Stewart. Merrill expects the commission to cut its prediction for euro region growth to 1.7% from 2%.“Growth prospects for both the euro region and the French economy have been deteriorating over recent months because of the increase in oil prices and the euro,” said an economist at Fortis Bank Nederland NV in Amsterdam, Elwin de Groot. “That’s affecting sentiment, at least among businesses.”The ECB on March 3 lowered its 2005 growth estimate to 1.6% for the euro region, less than half the pace forecast for America by the Organization for Economic Cooperation and Development. The euro region has lagged behind America for 12 of the past 13 years.Germany’s jobless registers have been swelled since the start of the year by a new law that brought 360,000 former welfare recipients onto the job market. Under the legislation, the unemployed face benefit cuts if they reject job offers. This month, the number of job seekers rose by 92,000.Economists had expected a rate of 11.9% and an increase in joblessness of 75,000, according to the median of 26 forecasts.Holger Fahrinkrug, an economist at UBS AG in Frankfurt, said the increase in unemployed reflects statistical glitches and not a “fundamental deterioration” of the labor market. He cited the welfare law’s effect and the fact that data was collected in the middle of the month, rather than the end of the month, missing the “so-called spring recovery” that he expected in the second half of March.In France, the number of unemployed rose to 2.76 million from January, using International Labor Organization methods, the Labor Ministry said in Paris. The jobless rate remained at 10.1%, the highest since January 2000.Economist expectations were for no change in the number of jobless and the unemployment rate, according to the median of 22 forecasts.“These are bad figures,” said Boone, who expected an increase of 10,000 in the number of unemployed. “Unemployment is rising, wages are not increasing. Why should consumers spend money?”

Unemployment in Germany Reaches Post-WWII Record

Unemployment in Germany Reaches Post-WWII Record

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