German jobs market may soon feel draft from US

Clifford Coonan

BERLIN: A rise in German unemployment on Tuesday shows how painfully

sensitive Europe's largest economy is to the US economic slowdown, and falling

orders and flagging confidence signals the situation may soon get worse. Germany

has so far been spared the US-style job losses in its manufacturing industry,

the backbone of the German industrial might.

But a wave of restructuring could soon hit Germany's blue chips, led by

electronics giant Siemens AG, and lead to major firms shedding jobs. German

Finance Minister Hans Eichel, said on Monday that Germany appeared more exposed

than others to a US slowdown and cited close links between corporate Germany and

North America.

"For Germany, it's clear that we have a relatively high dependency on

the United States because we have sent so much capital over the Atlantic,"

Eichel said. Eichel mentioned a recent conversation with a Motorola executive in

Germany, who said that while the company's European business was doing well, it

could not invest more in the Continent due to the situation in the United

States.

German unemployment adjusted for factors such as weather and seasonal hiring

rose 6,000 in April to 3.8 million from the previous month to give a rate, the

Bundesbank put at an unchanged 9.3 per cent. Flagging global growth has also hit

industrial order books, which saw their sharpest monthly fall in almost 10 years

in March, with a slide in the key export sector leading the way to a 4.4 per

cent decline.

Labour Office president Bernhard Jagoda said Germany's economic slowdown was

translating into lower job creation. Measures such as job creation schemes had

only limited impact. And there is ample evidence that job creation is slowing.

In February numbers in work rose 1,000 compared to January, well shy of a 61,000

rise in numbers in work a year earlier.

Trouble ahead?



Bundesbank president Ernst Welteke said on Tuesday that German jobless and
orders data were "very unsatisfactory" and proved the need for further

economic reforms. "In the first place economic policy such as structural

policy must do its part to increase the potential growth rate in Europe and

Germany," he added.

Souring the picture further is the bleak situation across the Atlantic.

Motorola, which has announced plans to lay off 22,000 workers worldwide as part

of a restructuring plan, is just one of dozens of firms which are shedding jobs.

Last week the US Government said employers had taken 223,000 workers off their

payrolls in April, the biggest drop since April 1991.

A raft of downbeat corporate job news has badly affected the outlook for the

German jobs market. Siemens said this week that it would push ahead with

measures to improve profitability across the group but gave no further details.

It has already announced a total of 6,100 job losses in its mobile handsets and

fixed networks business.

Fellow blue chip, carmaker DaimlerChrysler AG is planning to cut 35,500 jobs

worldwide. Leading industry groups warn that thinner order books and weak levels

of job creation herald difficult months ahead for the German labour market.

Germany's construction industry federation ZDB said last month that it

expected up to 60,000 jobs to go this year and forecast a 0.5 per cent drop in

new orders. The VDA car industry association said its members have stopped

taking on new staff on the back of a five percent drop in new registrations,

while the main retailers' group HDE warned that 25,000 jobs could go in the

sector.

On the upside, the machine engineering sector plans to take on 5,000 new

staffs this year and the metals and electrical industry has some 240,000

unfilled jobs. But rigid training structures means finding workers to fill

skilled jobs is not easy. Economist Stefan Muetze at Helaba said jobless rises

since the beginning of the year had been only minimal.

"In terms of trends, we expect stagnation on the labour market because

the economic environment does not encourage hiring. People are waiting until

they see what happens in the US and the euro-zone before making decisions,"

said Muetze.

Uwe Angenendt at BHF Bank in Frankfurt said the jobs data and the influential

Ifo institute survey of business confidence showed that Germany was increasingly

feeling the bite of the US and global slowdown. "Germany is especially

sensitive to such developments but one can expect that we'll see some delay in a

similar reaction in other euro zone countries," Angenendt said.

(C) Reuters Limited 2001.