According to the Munich Ifo Institute, “a trend reversal is imminent in the German labor market”, and another important labor market barometer is also on the road to recovery. A management report.
KShortly after the latest coalition resolutions to extend state-subsidized short-time working, there are positive trend reports from the labor market: two of the so-called labor market barometers, with which researchers use surveys to assess future developments, are on the road to recovery at the end of August. In the opinion of the Munich-based Ifo Institute, “a trend reversal in the German labor market is imminent,” as it announced on Thursday. “After there were layoffs in the past few months, the first signs of new hires have appeared.”
The Institute for Employment Research (IAB), which belongs to the Federal Employment Agency, expressed itself somewhat more cautiously, but also with a positive basic tendency. “Unemployment has picked up and the number of layoffs has returned to normal for the time being,” explained Enzo Weber, head of the IAB research department for forecasts and macroeconomic analyzes. However, Weber does not yet see any reliable signs of a renewed rise in the company’s labor demand.
The value of the IAB labor market barometer, which is based on a monthly survey of local employment agencies, has increased by 0.6 points compared to July to 98.3 points. On the one hand, it has made up for around two thirds of its decline since the beginning of the Corona crisis. On the other hand, it is defined in such a way that prospects of falling unemployment and increasing employment are only indicated by values above 100 points. The “unemployment” sub-index even improved by 1.4 points to 98.9 points. The “employment” sub-index, however, fell by 0.3 points compared with July to 97.6.
Difficulties especially in industry
The employment barometer calculated by the Ifo Institute is based on surveys of companies, which are used to determine whether they expect the number of employees to rise, stay the same or fall in the next three months. The total index calculated with this rose in August by 2.2 points to 95.2. It is defined differently than the IAB index, a value of 100 simply corresponds to the level in 2015. In the boom year of 2018, it had risen to 105.2 points and had reached a low of 86.4 in April this spring.
A closer look at the individual economic sectors provides a very mixed picture. In the manufacturing sector, i.e. the core areas of industry, significantly more companies are still geared to downsizing than to increasing their workforce. Most recently, the proportion of companies pessimistic in this sense outweighed that of optimistic companies by 19 percentage points. However, this balance had fallen to minus 29 in May, so it has improved significantly since then. In August it was still minus 8 percentage points after minus 26 in May. And in the rest of the service sector, according to the Ifo survey, a little more companies are planning to increase their workforce than to reduce their workforce (plus five).
However, this is not yet reflected in the experience of the employment agencies surveyed by the IAB, which have an overview of unemployment registrations as well as job offers and employment agencies. “It is becoming apparent that the recovery in employment will not be a sure-fire success,” commented Weber on the IAB employment index, which fell slightly in August. His explanation for the fact that unemployment seems to be developing a little more favorably in comparison: Many workers had withdrawn from the labor market for the time being during the crisis, so they temporarily gave up the search for a job they were actually looking for. At the same time, the economy – especially the previous employment engine, industry – is facing a difficult transformation process.
Typically few new hires in the holiday months
The governing coalition of the Union and the SPD decided on Tuesday evening, apparently in the light of an overall skeptical assessment of the labor market situation, to extend the state-sponsored short-time working in the crisis. The duration of short-time working in individual companies is to be extended from twelve to up to 24 months. In addition, by mid-2021, the companies should continue to receive full reimbursement of the social contributions levied on their employees’ short-time work benefits. The increase in short-time working allowance to up to 87 percent of the net wage, which was decided in the spring, is to be extended until the end of 2021. The additional expenditure for this is estimated at ten billion euros.
The Federal Employment Agency delivers reliable new figures on the latest labor market developments on Tuesday with its monthly report for August. This also includes an extrapolation of the short-time working figures for the month of June; these figures are always only available with a time delay. In May, the number of short-time workers had reached a historic high of 6.7 million. Experts reckon that the number has fallen since then – but is still a multiple of the old highs of up to 1.5 million after the financial and economic crisis in 2009.
The number of unemployed in July was 2.9 million, 634,000 more than in July last year. Unlike in April, May and June, however, the Federal Agency had not found any further “corona effect” in July: Although the number of unemployed had increased slightly compared to June, this decrease of 56,700 was within the normal seasonal range: Since it was in If there are typically few new hires during the holiday months, the number of unemployed temporarily increases slightly in July, even in normal times. The same goes for August. In September, a livelier demand for workers usually leads to falling unemployment.