–SA Unemployment: -31,000k (pan),-20,000k (west), -11,000k (east)

MNI survey median: +5k m/m
MNI survey range: +unchanged to +20k m/m

FRANKFURT (MNI) – Germany’s seasonally adjusted unemployment once
again surprised on the downside, falling by 31,000 to 3.382 million and
pushing down the unemployment rate to 8.0% from February’s downwardly
revised 8.1%, the Federal Labor Agency said Wednesday.

The fresh drop in unemployment figures is the result of statistical
effects. Excluding those effects, unemployment would have risen by a
1,400, though that would still have been significantly less than
analysts had expected.

The number of payroll jobs, for which the data lag one month, was
up by 7,000 in February after rising by 4,000 in March.

The number of job vacancies rose in March by 6,000, more than
offsetting February’s 3,000 decline.

Looking ahead, unemployment levels should continue to rise given
significant excess capacity, dwindling working hour accounts and the
expiry of government support measures for some firms.

IAB, the research arm of Germany’s Labor Agency, this month
projected 2010 average unemployment of 3.5 million — 120,000 more than
the previous year’s average. In fact, the number could be higher, the
head of Germany’s Labor Agency, Frank-Juergen Weise, told Market News
International last week.

In February, IAB warned that positive effects of short-time work
and flexible working hours, which had absorbed the brunt of the economic
crisis on the German labor market in 2009, appeared to be largely
exhausted.

In 2009, employees’ average annual working time decreased by 3.2%,
thereby saving an equivalent of roughly 1.2 million jobs, IAB said.
However, the decline in working hours decelerated in the second half of
the year, suggesting that “the possibility of firms to compensate the
under-utilization of workers via flexible working hours is now largely
exhausted,” the report said.

Weise said, “we are, maybe this year, at the point” where companies
will no longer be able to use short-time work to avoid layoffs to the
same extent as previously.

Workers have now largely exhausted the bulging work-time accounts
previous reforms had allowed them to build up. In addition, eligibility
for government support under the reduced-hour scheme is beginning to run
out for some companies and rising unit labor costs continue to narrow
margins.

Discussions with and assessments from companies suggest that
short-time work “will only be about half of the level in 2010 as in
2009. And this in turn is a consequence of companies saying it no longer
makes sense, and [in these cases] there will be dismissals,” Weise
predicted.

An improvement in the labor market is not expected before late 2011
or 2012, Weise said.

German companies will start making net new hires “at the earliest
in 2011, but more likely in 2012″ as companies first unwind some of the
measures taken to combat the crisis once the economy rebounds.

“Correspondingly the expectation is that in a turnaround, companies
will first use this buffer: They will use temporary labor, then
overtime, and only then will there be [new] hiring,” Weise predicted.

–Frankfurt bureau: +49-69-720 142, email: frankfurt@marketnews.com

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