Unemployment Rises Germany's Job Creation Machine Sputters

It was a good run. For over three years, the number of unemployed in Germany had been dropping. But statistics for December show that the trend has come to an end as the economic crisis hits the labor market.

For years, Germany had seen its unemployment rate drop steadily, all the way down to a November total of less than 3 million. That downward trend, though, has now officially come to an end. According to a report released on Wednesday by the Federal Labor Agency, which tracks German unemployment statistics, the number of jobless rose by 114,000 in December, bringing the total to 3.102 million or 7.4 percent.

Germany expects to see more people heading for the unemployment office in the coming months.

Germany expects to see more people heading for the unemployment office in the coming months.

Despite the late up-tick, 2008 will be remembered as one of the German labor market's best ever. On average, the total number of unemployed last year was 508,000 lower than in 2007. Analysts, though, anticipate that 2009 will see increased job losses in Germany.

"The December data shows that the economic crisis has reached the labor market," said Frank-Jürgen Weise, head of the Federal Labor Agency, in a statement accompanying the report. "As such, our optimism for the year 2009 is muted."

The new report marks an end to the slide in German unemployment that has continued largely unabated since early 2005. After rising through much of the early part of the decade, the number of jobless spiked to over 5 million in January 2005.

An increase in December was expected and most anticipate that unemployment will continue to rise throughout 2009. Phillip Jäger of the Bundesbank, Germany's central bank, warned that the December numbers may not accurately reflect the true nature of the German labor market, pointing out that many companies have thus far reacted to the economic downturn by sending workers out on forced leaves rather than laying them off. He warned that job cuts would begin in earnest in January.

Despite the bad news, the German Institute for Economic Research said on Wednesday that, while unemployment will be higher in 2009 than in 2008, it doesn't anticipate the situation to return to the days of persistently high unemployment seen in the middle of the decade. The institute also said it anticipates negative economic growth in 2009 of "a bit more than 1 percent," but expects 2010 to see a return to positive growth.

cgh -- with wire reports


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