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Germany’s Unemployment Unexpectedly Rose in September

October 01, 2013

Germany’s Unemployment Unexpectedly Increases in Uneven Recovery

Companies from Siemens AG to RWE AG have announced job cuts as they try to manage costs amid a recovery in the 17-nation euro area that the European Central Bank has described as “fragile.” Photographer: Michele Tantussi/Bloomberg

German unemployment unexpectedly increased for a second month in September, in a sign the recovery in Europe’s largest economy remains uneven.

The number of people out of work climbed a seasonally adjusted 25,000 to 2.98 million, after gaining by 9,000 in August, the Nuremberg-based Federal Labor Agency said today. Economists predicted a decline by 5,000, according to the median of 27 estimates in a Bloomberg News survey. The adjusted jobless rate rose to 6.9 percent from 6.8 percent.

While the German economy is growing, it’s not matching the pace of last quarter when it expanded 0.7 percent, the Bundesbank said in its monthly bulletin on Sept. 23. Companies from Siemens AG to RWE AG have announced job cuts as they try to manage costs amid a recovery in the 17-nation euro area that the European Central Bank has described as “fragile.”

“Although today’s increase in unemployment is not good news for the German economic picture as a whole, we wouldn’t see it as a sign that the German labor market has started to deteriorate,” said Annalisa Piazza, an analyst at Newedge Group in London. “We rule out that the resilience of the German labor market will be affected now that the economy is actually gradually recovering.”

Job Cuts

The increase in the unemployment rate was the first since October 2012, while remaining near a two-decade low. The September rate climbed to 6.1 percent in west Germany, from 6 percent. That compares with an unchanged 10.2 percent in east Germany.

“We have at the moment a situation in the German labor market where every fifth unskilled worker is without a job,” said Heinrich Alt, the vice president of the Federal Labor Agency. “With skilled workers it is about 5.4 percent, for highly qualified 2.4 percent. The labor market needs qualified workers, and we have a lot of people that don’t meet these requirements.”

Siemens, Europe’s largest engineering company, will eliminate 15,000 jobs, the Munich-based corporation said on Sept. 29. In Germany, 2,000 employees at the industry division, 1,400 energy-sector workers and 1,400 in the infrastructure and cities unit will have to leave, said Oliver Santen, a Siemens spokesman. Another 200 administrative roles will be terminated by the end of September 2014.

Consumer Climate

RWE, the biggest producer of electricity in Germany, plans to cut 3,400 of about 18,000 jobs at its Generation SE unit by 2018 as margins at its conventional power plants dwindle, a person briefed on the matter said Sept. 21, asking asked not to be identified before the plan is made public.

The Bundesbank said last month that German growth is still being supported by an “extraordinarily good” consumer climate, in part due to the labor market. The Frankfurt-based central bank predicts gross domestic product will rise 0.3 percent this year and 1.5 percent in 2014. Retail sales climbed 0.5 percent in August, rebounding from a drop of 0.2 percent in July, government data showed yesterday.

Chancellor Angela Merkel’s track record on the economy helped propel her Christian Democrats to win Sept. 22 elections and set her up for a third term as leader. The party said yesterday that it will hold exploratory talks with the Social Democrats at the end of the week as each side dug in for the prospect of months of negotiations to form a government.

European Jobs

The euro-area’s recovery may also be gaining traction. The region’s jobless rate unexpectedly fell to a revised 12 percent in July from a record 12.1 percent a month earlier, and held at that level in August, data from the European Union’s statistics office in Luxembourg showed today. Economists forecast the rate to remain at 12.1 percent, according to the median of 30 estimates in a Bloomberg News survey.

Manufacturing in the euro area expanded for a third month in September, London-based Markit said today. An index based on a survey of purchasing managers slipped to 51.1 from 51.4 in August as factory output also declined in Germany.

In the U.K., a manufacturing index fell to 56.7 from a 2 1/2-year high of 57.1 as export demand slowed. A gauge of factory activity in China rose to 51.1 in September from 51 a month earlier, the Chinese statistics office said. That was less than economists forecast, signaling limits in the nation’s rebound from a two-quarter economic slowdown.

ECB Forecasts

China’s government has a goal of 7.5 percent economic expansion this year. By contrast, the ECB forecasts the euro-area economy will recover gradually, contracting 0.4 percent this year and expanding 1 percent in 2014. It grew 0.3 percent in the second quarter to end its longest-ever recession.

Deutsche Lufthansa AG, Europe’s second-largest airline, said last month it’ll hire cabin crew on part-time, temporary contracts to help staff larger planes intended to boost ticket sales. The Cologne, Germany-based company plans to recruit 500 employees in 2014 on contracts that expire after two years, with an option to extend them by the same timespan.

“Employment growth is bringing too few unemployed back to work,” German Labor Minister Ursula von der Leyen said in a statement today. “The qualification profiles of the unemployed don’t fit companies’ recruitment requirements as much any more. In our labor market policies we must therefore rely more on providing training and skills.”

To contact the reporters on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net; Stefan Riecher in Frankfurt at sriecher@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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