In the middle of 2020, the German labor market continues to be under pressure amid the coronavirus pandemic. By the end of spring, the growth of unemployment had slowed down, but now the labor market still has the highest number of job seekers in the past 10 years. What are the prospects for the German labor market, and how quickly can the country's economy recover from the lockdown?

The latest economic news confirms that the bottom of the coronavirus crisis has already been reached, the general mood in the economy is improving, and growth lies ahead. Optimism is spreading to the financial markets where long-term investors are starting to return. However, the moment of transition from decline to growth should not be confused with the boom phase. Markets are just beginning to turn around, and it will take some time for them to return to pre-crisis levels. The question is, how long will this take, and what will happen to jobs in the coming months?

The Institute for Macroeconomics and Business Cycle Research in Dusseldorf (IMK) predicts that the number of unemployed will continue to rise. In real practice, the labor market has turned out to be more inert than other markets, and unemployment continues to grow despite the general growth of the economy. The demand for goods and services has decreased, and now it is inexpedient for companies to maintain the staff at pre-crisis levels.

IMK's forecast states that, by the end of the year, there will be about three million unemployed in Germany, but in 2021, this number will start gradually declining. Last year, the number of unemployed was around 2.3 million; the last time this rate reached three million was the early 2010s. Given the fact that the German economy is in its worst recession since World War II, the unemployment situation looks less critical.

What is the likelihood that IMK’s forecast will come true and under what conditions? First of all, the stabilization of the labor market can be influenced by the government. According to IMK, about 6.3% of the GDP is currently allocated to support the country's economy. This allows for maintaining the production level so that it does not decline more, hence the percentage of staff reductions in companies is decreasing.

In addition, as an assistant measure for enterprises, the government temporarily undertakes part of salary payments, for example, for short-term work. This allows companies to preserve some jobs or open new temporary vacancies, which would be impossible without support. This strategy worked well during the previous global economic crisis, and IMK’s analysts believe that in this situation, the approach will be effective too.

However, no one can guarantee that the forecast of the Dusseldorf experts will fully come true. For example, if the demand for German products in other countries doesn’t increase, the economic recovery could slow down, and the number of unemployed will increase even more. On the other hand, the bailout programs of the European Central Bank, together with the planned reconstruction fund, could prompt growth in other European economies, which, in turn, could have a positive effect on Germany as well.

The crisis is going to have far-reaching consequences for the economy. This will accelerate such tendencies as digitalization and de-globalization and could have a lasting impact on consumer behavior, with the corresponding consequences for retail.

Germany is one of the key markets for Andersen, so we pay close attention to the situation. Our analytical department gave the following comment:

The coronavirus epidemic continues to keep the pressure on the German labor market. Although many employees work part-time, according to the German Ministry of Labor, the number of unemployed increased by 40,000 in June and amounted to 2,853,000 people or 6.2%. On the other hand, the dynamic of unemployment growth is declining (+40,000 people in June versus +169,000 people in May).

The situation in the job market is similar. Despite the decrease in the number of vacancies to 570,346 (in June), this dynamic is also improving. In June, the number of vacancies decreased by 13,000 compared to May, while in May, the decrease was about 43,000 compared to April. This data allows us to look to the future with cautious optimism.

Governments should give soft loans to those with ideas and willing to go entrepreneurial

softeeg:
Governments should give soft loans to those with ideas and willing to go entrepreneurial

In real practice, the labor market has turned out to be more inert than other markets, and unemployment continues to grow despite the general growth of the economy. The demand for goods and services has decreased, and now it is inexpedient for companies to maintain the staff at pre-crisis levels.

omodejk12:

In real practice, the labor market has turned out to be more inert than other markets, and unemployment continues to grow despite the general growth of the economy. The demand for goods and services has decreased, and now it is inexpedient for companies to maintain the staff at pre-crisis levels.

True! People can no longer buy

However, no one can guarantee that the forecast of the Dusseldorf experts will fully come true. For example, if the demand for German products in other countries doesn’t increase, the economic recovery could slow down, and the number of unemployed will increase even more. On the other hand, the bailout programs of the European Central Bank, together with the planned reconstruction fund, could prompt growth in other European economies, which, in turn, could have a positive effect on Germany as well.

softeeg:

True! People can no longer buy