German approach to jobloss pares down numbers

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Even as the German economy suffers through its worst slump since World War II, the government unveiled a seemingly happy surprise recently: Not many people lost their jobs in July.

So has Germany escaped the ravages of the downturn? Probably not, economists say.
The apparent resilience of the labor market is more indicative of a peculiarly German approach to combating the punishing recession than underlying trends in the economy.

Germany has found creative ways to keep people off the jobless rolls, whether they have work to do or not. Politicians laud the measures, which aim to keep unemployed people nominally on someone’s payroll, as a bridge over the steepest period of economic collapse.

But many economists argue that the short-term jobless statistics may mask a less optimistic trend that could undermine confidence in the fall, when recovery is supposed to take hold. “The Achilles’ heel is in the coming months,” said Ulrich Wortberg, analyst at Landesbank Hessen-Thuringen. “The recovery is filled with risks.”

The number of unemployed in Germany showed a moderate rise of 52,000 in July 2009. Compared with the same period a year ago, 252,000 people have lost their jobs.

Those figures are dwarfed by the increase of 6 million in the number of jobless over the past year in the United States, even allowing that Germany has a little more than one-fourth the population of the United States. Where the unemployment rate in the United States soared to 9.5 per cent in June compared with 5.6 per cent the year before, the German unemployment rate was 8.2 per cent in July compared with 7.7 per cent a year ago.

With Chancellor Angela Merkel seeking re-election in September, the unemployment numbers have real political implications.

While there are no suggestions of any tinkering with the data, it is also widely noted in Germany that both government and big business have an incentive to lift people’s spirits so close to the election in September. “At the end of the day, German corporations will have to restructure anyway, will have to downsize capacities,” said Eckart Tuchtfeld, senior economist at Commerzbank. “And that contributes, of course, to our picture of a somewhat subdued recovery, particularly in Germany, because of the lags in reaction to the economic crisis.”

Economists estimate that the government-subsidised programme of short working hours — known as Kurzarbeit — has helped avert roughly 400,000 layoffs so far, with 1.3 million to 1.4 million people in the short-time programme, according to government estimates.

But with the economy expected to shrink by at least 6 per cent this year, experts say that stopgap measures will give way at last to a far bigger wave of layoffs this fall, after the election.

Metin Marul was let go from his assembly-line job at a Mercedes supplier near Stuttgart in May.

He still has not found a new position to replace the one he lost. Yet according to the government, he is not unemployed. Marul, 42, is one of about 60 employees from the shuttered factory who ended up instead on the rolls of what is known in Germany as a transfer company. At an office in Reutlingen run by the company MyPegasus, Marul, a Turkish-born immigrant, works on his resume, talks to an adviser about how to look for work, and can take courses to advance his technical skills or improve his non-native German.

He can also collect roughly 80 per cent of his salary for a year, with the costs split between the government and his former employer. “It’s better for me at the transfer company, because I can learn here and look for work,” Marul said. At the Wadan shipyard in the northern state of Mecklenburg-West Pomerania, nearly 2,500 workers are expected to enter a transfer company, with the state government putting up more than $20 million to cover the shipyard’s share of the expense.

Daniel Friedrich, a spokesman for the union IG Metall, called the state’s decision to ensure that a transfer company could be set up a “responsible” one, but said the union was worried about the future. “The fear is there that after the Bundestag election, firms will pull back from short-time work and instead go ahead with more layoffs. At that point the subject of transfer companies will automatically take on a new dynamic,” Friedrich said.

MyPegasus has 20 permanent offices around Germany, but right now it has another 30 temporary offices, set up on a project-by-project basis.

The company’s Executive Director, Rainer Schwille, said they were currently at a record level; usually they would have 1,000 to 1,500 people, but that number has risen to 2,500. And he said more laid-off people were expected. “We fear that the layoffs will only intensify after the summer vacations are over, and the companies still don’t have the level of orders that they did before,” Schwille said. Employees at MyPegasus said the transfer company was more than just a technical difference from unemployment.

“There’s a psychological aspect. A lot of people fall into a hole when they say, ‘I’m unemployed now.’ At a transfer company you don’t feel that way,” said Jochen Bordt, 40, a mechanics instructor. “It does you good not to fall so deep in the hole right away.”  Marul, a married father of two who worked for eight years at the auto parts factory before he was laid off, said that it was a boost to have somewhere to go where he saw familiar faces from the shop floor. “For eight years we were making things together; maybe we can do it here,” he said.

Not everyone is optimistic about their chances. Uwe Baier, 31, was laid off in April from a job making oil coolers for trucks at a nearby factory. At MyPegasus he is learning to use computerised machine tools for the first time, which he praised as an important work skill for the future. He did not, however, think it would help him enough in the present economy to find a new job. “In the next couple months? It’s not good,” Baier said. “I’d say my chances are bad.”