Germany unemployment estimated to sky rocket in 2009

According to the Nuremberg-based federal Labor Agency, the number of people unemployed dropped 10,000 in November to 3.15million. The previous month, October, 26,000 people lost their jobs and now the unemployment rate is held at 7.5%, this being the lowest in the last 16 years. This drastic reduction of businesses cutting jobs from October to November is due to the employers being slow to react to the decrease in sales.

“Companies haven’t started broad-based layoffs just yet,” said Joerg Lueschow, an economist at WestLB in Dusseldorf. “Carmakers are extending holiday shutdowns, running down flexitime accounts and temporary workers are being cut.”

German recession has a time lag of nine months according to the Clogne-based IW economic institute. This means that unemployment in Germany should get worse by the beginning of 2009.

Instead of firing employees, companies are shortening the work hours as well as not hiring any temporary staff. Adecco SA and Randstad Holding NV, the biggest suppliers of temporary staff, have already announced a decrease in profit.

“At the moment we’re still adding jobs in production, quality management, clinical research and drug safety,” said Biotest AG Chief Executive Officer Gregor Schulz. “But we’re doing it cautiously because we’re not quite certain about developments next year.”

Germany currently has the largest market in Europe for truck sales and after seeing its sales rising 21% in September, in October they fell 8.5%. This caused companies like Daimler AG and MAN AG to reduce their workforce and decrease production.

This situation however, is thought to get much worse. “We’re assuming that unemployment won’t increase to the same extent as the economic situation worsens,” Weise told reporters in Nuremberg. “While the labor market may not yet be affected by the economy’s downturn in December and January, it will be hit “in the second quarter at the latest.”

Germany is also the world’s largest car exporter but due to the crisis, car makers are drastically reducing production. Bayerische Motorenwerke AG has been seriously effected by this and will therefore have to cut 5,000 temporary staff as well as at least another 3,100 full time staff.

The Organization for Economic Cooperation and Development that unemployment in Germany is estimated to increase to 8.1% in 2009 and to 8.6% in 2010 from the 7.4% rate in September 2008.