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German labour market’s glamour (partly) gone

May 14, 2020
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The COVID-19 pandemic and, in particular, lockdown measures will push the German economy into its biggest slump since WW2. The COVID-19 pandemic hits German labour market differently than the Global Financial Market Crisis of 2009. First, it is acting almost simultaneously as a supply shock and, as a result of the measures to restrict contact, as a demand shock. Second, is the speed and the might with which it has brought the economy to a standstill in many areas of Germany and around the world. Third, private consumption will suffer the biggest blow. During previous periods of economic weakness, private consumption has always been a supporting pillar of the German economy and thus also provided a counterweight to employment losses in export-oriented companies. At present, however, the domestically oriented and personnel-intensive service sector is failing as a driver of employment. By April 26th, 751,000 companies had already registered for short-time work. This should imply an increase in the number of people actually on short-time work to up to 10 m. Despite the comprehensive measures to secure employment, which ultimately include support measures for companies, the number of unemployed persons is expected to climb to 3 m in 2020. Employment is likely to fall in 2020 by a good 1%. [more]

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