German Unemployment Rises to Highest Level in 3 Years (Update3)
By Brian Parkin and Andreas Cremer
Berlin, July 9 (Bloomberg) -- German unemployment climbed in June to the highest level in almost three years as companies including Deutsche Bank AG cut jobs in Europe's largest economy.
The number of people out of work rose by 39,000 to 4.09 million, the government said. Unemployment rose a revised 65,000 the previous month. The jobless rate increased to 9.8 percent from 9.7 percent.
``It's a bleak picture,'' said Ulrich Schillert, a board member responsible for hiring at Deutsche Woolworth GmbH, a retail chain with 15,000 employees. ``I see no improvement.''
The German economy grew just 0.2 percent in the first quarter after shrinking in the previous six months. Business confidence declined in June, suggesting employers won't step up hiring soon. Rising unemployment is hurting Chancellor Gerhard Schroeder's campaign for a second term in September.
``Lengthening jobless lines are a liability for Schroeder,'' said Hans-Juergen Hoffman, a political analyst at Psephos GmbH, a market research company. ``The electorate won't buy any promises it will get better.''
Adjusted for EU standards, the German unemployment rate was 8.3 percent in June -- equal to the average rate for the dozen countries sharing the euro in May. The U.S. jobless rate rose to 5.9 percent in June as companies hired half the number of workers expected by economists.
`In Low Gear'
Deutsche Bank AG said last month it will eliminate 3,770 jobs in addition to the 9,200 that were announced last year. HVB Group said last week that it may trim more positions as earnings tumble. The Munich-based lender already announced plans to shed 9,100 staff, or 12 percent of the workforce.
The collapse of the 111-year-old German engineering company Babcock Borsig AG has put 13,000 jobs at risk. Schroeder had pledged 430 million euros ($425 million) to try and avert the country's fourth major corporate failure this year.
Verlagsgruppe Handelsblatt GmbH, publisher of the business newspaper Handelsblatt, said on June 25 it will cut 175 jobs as advertising sales decline. Concord Effekten AG, a stockbroker and investment bank, plans to eliminate a quarter of its workforce to cut costs as markets slide.
``Don't expect any improvements in unemployment before autumn at the earliest -- and then probably a weak improvement,'' said Wilhelm Adamy, a labor market forecaster at the German DGB trade union federation, which has 7.7 million members.
``The economic motor is still in low gear,'' he said.
Struggling to Grow
German factory production declined 1.3 percent in May from the previous month, separate government figures released today showed. Economists had predicted a gain of 0.3 percent.
In the second quarter, the economy may have expanded 0.5 percent, the Economics Ministry said. The economy won't grow by more than 0.75 percent this year, Finance Minister Hans Eichel told industrialists this week.
``We need at least two quarters of strong economic growth -- 2 percent at least -- before we'll see improvement,'' said Volker Nitsch, an economist at Bankgasellschaft Berlin AG. ``That means waiting until the end of the year.''
Europe as a whole is struggling to recover. European consumers and companies grew more pessimistic in June as stocks tumbled. The Dow Jones Stoxx 50 Index fell 17 percent this year, erasing about 1 trillion euros ($970 billion) in market value.
The euro's 11 percent gain against the dollar this year may damp exports, which account for 38 percent of the region's gross domestic product and helped the economy expand in the first three months of the year.
Schroeder's Support
Support for Schroeder's SPD is 33 percent, according to an opinion poll by the Allensbach market research company published in the Frankfurter Allgemeine Zeitung newspaper on July 3. That compares with 38 percent for the opposition.
In a bid to revive his flagging campaign, Schroeder said this month he will ``without delay'' adopt a set of proposals devised by Volkswagen AG personnel director Peter Hartz aimed at halving the country's jobless level in the next three years.
The Hartz panel, including board members of DaimlerChrysler Services AG and BASF AG, recommended steps to move jobless into temporary work, speed up job placements, limit unemployment benefit payments and combat illegal employment.
The government jobless figures are adjusted for seasonal changes.
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