Jobless Rate on the Upswing

A weak economy pushed the German unemployment rate to 9.7 percent in July, according to figures released by the Federal Labor Office on Wednesday.

That compares with a June rate of 9.5 percent and the climb – while lower than some analysts had feared – means continued challenges for the Schröder regime just six weeks before federal elections.

In July, the seasonally unadjusted number of unemployed Germans climbed to 4.05 million, up 92,000 from June and 249,000 from July 2001. These were the worst July figures in the past four years.

The Labor Office said that unemployment typically goes up in July as young people who have just finished their studies start hunting for jobs.

In contrast to last month’s report, the increase was concentrated in the former West Germany. Some 2.64 million west Germans were unemployed, an increase of 75,900 from June. In the Eastern states, 16,700 more people were jobless, bringing the total to 1.41 million.

“The economic forces are too small and not stable enough to improve the labor market,” said Labor Office Director Florian Gerster.

Analysts had expected worse news

The increase was, however, less than analysts had reckoned with. Earlier predictions said the seasonally adjusted number of jobless might climb by as many as 30,000 from June. The Federal Labor Office said there were 8,000 more jobless people in July than in June once the figures were adjusted to reflect seasonal variations.

Analysts viewed this with caution. “One shouldn’t see this as the beginning of a trend because unemployment is likely to rise through the end of the year,” Commerzbank analyst Christoph Hausen told Reuters.

“If one looks at the unadjusted data, which plays a big role in the political discussion, then we’re at over 4 million and we expect that for August as well.”

Gerster said he expects improvements by the fouth quarter of 2002, but other analysts predicted that improved economic conditions won’t arrive until next spring.

More details on Hartz Commission plan

In the meantime, details of a plan being developed by a government-appointed commission to reform the German job market were made public. The 150 billion euro plan calls for fast-forwarding projects that originally had until 2019 to be completed.

The so-called Hartz Commission, which gets its name from Peter Hartz – the Volkswagen executive who leads the commission – meets in Berlin on Thursday to finalize details of the proposal.

Backers say it would create up to 1 million jobs, especially in the eastern states. It would be financed by paper issued by a German development bank to capital markets with tax benefits for investors.

The federal Finance Ministry welcomed the plan, but top opposition party politicians criticized it as “unserious.”