The Financial Times on Germany 3

The Financial Times on Germany 3

Unemployment in Germany drops sharply

By Bertrand Benoit in Frankfurt

Published: June 28 2007 20:37 | Last updated: June 28 2007 20:37

Unemployment in Germany dropped sharply in June, providing an additional fillip to the government of Angela Merkel as the chancellor’s popularity ratings reached new highs.

The number of jobseekers in Europe’s largest economy fell by a seasonally adjusted 37,000 in June, almost double the drop economists were expecting and the steepest fall since March.

Figures released by the Federal Labour Agency yesterday put Germany’s unemployment rate at an adjusted 9.1 per cent.

The fall in unemployment had slowed down in the spring, which economists had attributed to the statistical effect of this year’s unseasonably mild winter, a view confirmed by the surprisingly good June figures.

The unbroken downward trend in joblessness underlines the strength and resilience of Germany’s economic recovery. At an un­adjusted 3.69m, the number of jobseekers in the country is now 1.5m below its peak of early 2005.

“Business surveys are signalling that job growth will remain high in the coming months,” wrote Dirk Schumacher, economist at Goldman Sachs, in a note.

“This bodes well for private consumption and growth in general.”

Data showed that 8,000 jobs had been created in May, the latest month for which employment figures were available. A rise in vacancies by 11,000 in June demonstrated the tightness of the labour market, which economists think could in time lead to inflationary wage increases.

Industry organisations say that between 40,000 and 50,000 engineering positions cannot be filled. The Federal Labour Agency said its data pointed to a figure of 10,000 to 12,000, with acute shortages in several regions.

Workforce shortages have overtaken unemployment as politicians’ chief economic concern, sparking debate in Berlin about the need for better training.

Another idea being considered in the capital is the introduction of a more welcoming immigration policy aimed at the highly qualified.

Volker Kauder, parliamentary head of Ms Merkel’s Christian Democratic Union, said on Thursday that the coalition would address the issue after the summer with a programme that would focus on improving applicants’ qualifications

“I do not want our companies to behave like some of our football clubs by refusing to train people at home and buying the best players abroad,” he said.

The comment was a response to Annette Schavan, the CDU education minister, who had called for higher, more selective, immigration.

The Social Democratic party, junior member in the coalition, has traditionally been the more sceptical party towards boosting immigration.

Immigration is no vote-winner in Germany, but the SPD’s position and its recent efforts to raise its profile as the more socially responsible party in the ruling alliance have yet to show a positive effect on its flagging ratings.

A poll by the Forsa market research group this week showed 39 per cent of respondents would vote for Ms Merkel’s CDU today, a two point rise in a week, compared with 24 per cent who would vote for the Social Democrats. That was the SPD’s lowest rating since the last general election, two years ago.

It was the first survey since the election that gave the CDU a majority in parliament together with the free-market Free Democratic party, its traditional ally, whose rating was stable at 10 per cent.

The SPD’s steady slide in opinion surveys, the disastrous personal ratings of Kurt Beck, its chairman,and the formal creation of a united Left party last week have triggered near-panic in the Social Democratic camp. The leaders of the SPD’s left wing have called for Mr Beck to emphasise the party’s social agenda ahead of three important state elections in Hesse, Lower Saxony and Hamburg early next year.