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German unemployment rate remains stable as economy takes record plunge

The unemployment rate in Germany held steady at 6.4 percent in July, unchanged from June, in a new sign that the worst of the economic storm unleashed by the coronavirus may be over.

German unemployment rate remains stable as economy takes record plunge
A sign in Dresden in June says "We're hiring!". Photo: DPA

The jobless rate had begun flatlining in June, which was just 0.1 percentage point up on May, seasonally-adjusted figures from the BA federal labour agency showed.

Before the pandemic struck Europe's top economy, the ranks of the unemployed had hovered at around 5.0 percent, record lows since reunification.

READ ALSO: German unemployment stable despite recession warning

“The job market remains under pressure because of the coronavirus pandemic, even if the German economy is now on a recovery path,” noted Daniel Terzenbach, who heads the BA's regions department.

The impact of the crisis on the job market has been cushioned by Germany's shorter hours scheme, in which the government tops up workers' wages when  their shifts are slashed.

After an initial surge to 10.6 million in March and April combined, the numbers of new applications for the scheme have come down significantly.

Between July 1st and 26th, applications were received for 190,000 workers.

Latest data showed that payments for shorter hours were paid to 6.7 million workers in May, up from 6.1 million in April and 2.46 million in March.

Underlining the scale of the crisis sparked by the closure of borders, shops and schools to halt transmission of the virus, the BA said the demand  for the scheme was “far above the time of the major recession in 2008 and 2009.”

Nearly 650,000 businesses also applied for Kurzarbeit (shorter-worker hours), levels not seen since the 2009 financial crisis

Shrinking German economy

The German economy shrank by a record 10.1 percent in the second quarter of 2020 because of the coronavirus impact, official data showed Thursday, the biggest decline in the country's post-war history.

Federal statistics agency Destatis said “the historic decrease” quarter-on-quarter was worse than any seen during the financial crisis of 2008-2009.

The pandemic had led to “a massive slump” in both exports and imports, it said, but noted that government spending had increased from April to June.

But it's not all bad news: Germany has withstood the coronavirus shock better than many of its neighbours.

Stable infection rates encouraged the country to relax coronavirus restrictions in early May, allowing factories, shops and restaurants to reopen.

Thursday's data “is a glimpse in the rearview mirror”, ING bank analyst Carsten Brzeski told AFP.

“The economy already began picking up in the course of the second quarter.”

Altmaier said he expects the German economy to return to growth in October, boosted by unprecedented government stimulus to spur investment and consumer spending, alongside huge rescue packages that have helped companies like Lufthansa stay afloat and preserve thousands of jobs.

READ ALSO: EU approves huge bailout of German giant Lufthansa

Germany's bounce-back should also get a lift from the European Union's 750-billion-euro coronavirus recovery plan.

Altmaier's ministry forecasts that German output will contract by 6.3 percent in 2020 before expanding by 5.2 percent in 2021.

By contrast, the European Commission expects the economies of France, Italy
and Spain to shrink more than 10 percent this year.

Second wave fears

Better-than-expected business and consumer confidence surveys recently suggested Germans are feeling more optimistic about the future.

But concerns have grown over a spike in COVID-19 cases at home and across Europe, partly fuelled by summer travel.

As an export powerhouse, Germany is highly vulnerable to virus setbacks in other countries that could lead to renewed shutdowns that once again disrupt supply chains and suppress demand.

In April and May, at the height of the global lockdowns, German exports plummeted around 30 percent year-on-year.

Germany's mighty industrial sector, already feeling the pain from US-China trade tensions and Brexit uncertainty, has been especially hard hit.

Car manufacturing alone fell 40 percent year-on-year over the first six months of 2020, a 45-year low.

ING analyst Brzeski said German exports would take time to return to pre-pandemic levels, leaving the country to rely on domestic demand to power its rebound.

KfW chief economist Fritzi Köhler-Geib said the German economy had a “successful start” to the summer but it was “too early to give the all-clear”.

“The pre-crisis level will remain a long way off for the foreseeable future, and the continuing fierce rage of the pandemic in large parts of the world is an enormous risk for Germany as an export nation.”

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READER QUESTIONS

Reader question: Is it ever legally too hot to work from home in Germany?

Germany has regulations on working during a heatwave - but does that also apply to people who work remotely? We take a look.

Reader question: Is it ever legally too hot to work from home in Germany?

The number of people working from home shot up during the Covid pandemic, and though employees no longer have the right to work remotely by law, many have chosen to stick with more flexible arrangements and set up a home office at least part of the week.

This is great news for people who enjoy a lie-in more than a long commute, but there are some downsides. One major issue is that it’s not always clear how Germany’s strict employee protection rules actually apply in a home setting. The rules for working during a heatwave are a good example of this.

How does Germany regulate working in extreme heat? 

By law in Germany, employers are responsible for creating a safe environment for their workers. This means that they should try and keep the temperature below 26C at all times and are legally obliged to take action if the temperature goes above 30C. 

That could include putting blinds on the windows to prevent the glare of the sun, installing air conditioning systems or purchasing fans. In some cases – such as outdoor manual labour – it could also involve starting and finishing earlier in the day. 

And in really high temperatures, employers may simply decide to call the whole thing off and give their employees a ‘hitzefrei’ day – basically a heat-induced day off – to go and cool down in a lake. However, business owners are generally given free rein to decide how hot is too hot in this instance (except in the case of vulnerable workers). 

READ ALSO: Hitzefrei: Is it ever legally too hot to go to work or school in Germany?

Do the heat rules apply to ‘home office?’

Unfortunately not. In most cases in Germany, the company isn’t directly involved in setting up the workspace for an employee that works from home, aside from possibly providing a laptop or phone for remote use. 

“The occupational health and safety regulations regarding room temperature do not apply in this case,” labour law expert Meike Brecklinghaus told German business publication T3N. “This is because the employer does not have direct access to the employee’s workplace and in this respect cannot take remedial action.”

That means that on hot days, it’s the employee’s own responsibility to make sure the environment is suitable for working in. 

woman works from home in Germany

A woman works in her living room at home. Photo: picture alliance/dpa | Daniel Naupold

One duty employers do have, however, is to instruct their workers about the best way to set up a healthy work environment at home, for example by giving guidance on how to regulate the temperature. 

“In the end, it is the employee’s responsibility to maintain his or her workplace in a condition in which he or she can perform his or her work without the threat of health impairments,” Brecklinghaus explained.

What can home office workers do in hot weather?

There are plenty of ways to keep flats cooler in the summer months, including purchasing your own fan, keeping curtains or blinds drawn and ventilating the rooms in the evening or early morning when the weather is cooler.

However, if heat is really becoming a problem, it’s a good idea to communicate this to your employer. This is especially important if you have a health condition that makes it more dangerous to work in hot weather. 

In some cases, you might be able to negotiate for the employer to pay for the purchase of a fan or mobile air conditioner as goodwill gesture. If possible, you could also arrange to travel to the office where the temperature should be better regulated.

Another option for early birds or night owls is to arrange more flexible working hours so you can avoid sweltering at your desk in the midday sun, although this of course depends on operational factors. 

READ ASO: Jobs in Germany: Should foreign workers join a union?

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