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The 2916 labor market in Germany

We are halfway through 2016. This time of year, various institutes traditionally publish their prognosis for the coming six months. In this, the expectations of the Institute for Employment Research hit pretty close to reality.

 

At first sight, expectations seem to be somewhat dampened. The reason for this is the job indicator which fell slightly 0.1 point in May. It still remains overwhelmingly positive at 102.3 points overall. Things only start looking dim if it drops below 100. Hence the labor market still looks solid, and it seems reasonable to expect job opportunities to remain good in this country. Another piece of information supporting this view is that various trade associations of small to medium sized companies have announced that they plan to create more than 300.000 jobs this year. It pays to take closer look at the number, though:

 

Especially the part dealing with unemployment surprises at first glance. The indicator is 99.3 points, which is in the neutral to slightly negative area, about 0.1 points less than in April. This doesn’t quite go together with the monthly data released by the Labor Office in Nuremberg, which has been steadily reporting seasonally adjusted unemployment as going down.

 

The source of the now expected rise in unemployment lies elsewhere. Recently, the Federal Office for Migration and Refugees (BAMF) announced that the asylum applications, both from before August 2015 and those handed in since the opening of the borders in autumn 2015 will now be swiftly be fully processed. In consequence, those granted asylum seekers and tolerated persons will now be able to apply for jobs. Hence, they will initially become part of the unemployment statistics, as for most lack of German skills often prevents them from finding work right away. However, there have been a lot of projects, both from the government side and from private initiatives, to prepare and facilitate their entry into the labor market, and the newcomers are at large happily accepting those offers. Still, over the coming year it is possible the unemployment rates will rise despite a continued rise in jobs.  The apparent paradox is therefore easily explained as the number of job seekers is going up than the number of jobs. Looking at a growth of GDP this year and a record revenue for the treasury and social funds, the effect will be easy to handle at least financially.

 

The no doubt high numbers of immigrant, however, also causes higher levels of employment in other areas of industry. The employment outlook published by the IAB is definitely positive at 105.3 points. Still, that is a loss of 0.2 points since last month, and even 1.5 point since the beginning of the year. That hints that the rapid job growth is expected to slow down in many industries.

 

At the same time, more women and people above 50 are being active in the job market, independent of the immigration issue. A higher number of job seekers are meeting a market where qualified personnel are more and more in demand in many industries and professions. It has long been predicted that the time of widespread early retirement is over. Our economy plainly can no longer afford to forgo the expertise and experience of older workers and women.

 

We will be eager to see how the data develops until autumn. Some market observers expect another record high in employment for Germany. It is quite possible that we will see the 44 million bar reached by the end of the year. Already (as of the statistics of 13 Jul 2016) the minister of finance can calculate with about 6.5% increases for 2016. Much of this increase comes not only from consumption tax and corporation tax, but mostly from income tax paid by employees and self-employed people in this country.

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