Unemployment rose for the first time in almost three years in December in Germany as corporates cut jobs in the midst of falling exports and dwindling domestic demand. The number of people out of work rose by a seasonally adjusted 18,000 in December, data from the Federal Labour Agency revealed on Wednesday. The total unemployment number rose to 3.18 million in December. Analysts were expecting an increase of 10,000.
“The December (2008) figures show that the economic crisis has reached the labor market,” said Labor Office chief Frank-Juergen Weise. “This has also dampened our optimism for 2009,” he added.
The German economy, which had up until now resisted the pressures of the financial crisis, buckled as demand for German goods dropped in key markets. The economy slipped into a recession in the third quarter and both exports and industrial production declined in October.
Luxury car maker BMW said that its US car sales had dropped 36 percent in January from a year earlier. Daimler’s announced that sales had dropped by 24 percent y-o-y at its US Mercedes-Benz Cars unit. Over the past months German automakers including BMW AG, Daimler AG and General Motors Corp. have been cutting back production to align supply to dwindling demand.
German companies for the most part have avoided mass lay-offs. Early this month, Germany’s biggest corporates pledged to abstain from mass job cuts. But small and medium size firms, hard-hit by the economic slowdown are skeptical about such pledges. SMEs employ about 70 percent of the work force.
To boost growth, the German government announced a €31-billion ($41.75 billion) stimulus plan in October. However, as the slowdown continues, Chancellor Angela Merkel's ruling coalition is considering a second economic stimulus package of €50 billion ($68.2 billion). Spread over two-years the stimulus package would invest in infrastructure projects.
