Friday, October 1, 2010

German Unemployment Rate Down to 7.2% after Peaking at 8.7%; Can We Learn Anything?

In America, any European economic model is "evil" (codeword for "socialist").*  There is nothing we can learn from foreign lands since we're #1 at everything... just ask us.  Every European market is inflexible, low growth, and focuses too much on helping people rather than corporations.  (which per U.S. Supreme Court ruling are now people too).  Plus "those people" get 4-6 weeks vacation - how do they look at their lazy selves in the mirror (or compete globally?)  Those thoughts are brought to you by the same people who said "housing could never fall nationally in the U.S." and "when the global economy recovers, the U.S. will lead it - not China".  We truly are a narcissistic nation.

*ironically the U.S. is a socialist state itself... only our socialism is corporate in nature, rather than towards citizens.

At this point the entire U.S. Department of Education should be stationed in Finland trying to mimic whatever they are doing to be ranked top notch in science and math, the entire Energy Department should be in France figuring out how they have the best nuclear energy program in the world (80% of energy from that source), and the entire Commerce Department should be stationed in Germany to figure out how a highly paid workforce can create 40% of GDP via manufactured exports.  [Aug 26, 2009: China Poised to Tie Germany for World's Lead in Merchandise Exports]   The Energy Department could stop by Germany as well since the U.S. is about a decade behind in "green energy initiatives".  [Aug 25, 2009: UK Telegraph - China Powers Ahead as it Seizes the Green Energy Crown from Europe]  The Transportation Department can go to pretty much any 1st world country (and probably a few "2nd world") in the globe and see how far behind we are.  Once they import this knowledge from Europe, all these departments should then be eliminated since they have been abject failures... save the taxpayer some money.

Do any of these countries have a perfect system?  No, not close.  Could we learn *anything* from them?  Even one thing?  Apparently not per most commentary I hear on the TeeVee... we have it all figured out apparently.  (I know, I know - if you like it so much go move there! - save the snarky comment)


Somehow the "inflexible" labor force of Europe now has (in some countries) lower unemployment rates than "slash and burn your multinational disposable labor" America.  [Jul 27, 2010: NYT - Industries Find Surging Profits in Deeper Cuts]    [May 26, 2009: NYT - "Official" US Jobless Rate Likely to Pass Europe'sThe dogma of how wonderful the "flexible" American labor system is working in a country where there has been ZERO private labor growth for a decade is overpowering.  (most of the 'flexibility' in the U.S. is simply the ability to move work overseas and/or create a new temporary worker class lacking benefits, and compensate the CEO class in bountiful manner for this 'very difficult' work)  But that obfuscation is not so immense as deriding the lousy "socialists" in Europe, when all U.S. net job growth in the past decade+  has been in government or government subsidized healthcare and education.  [Aug 14, 2009: Prosperity Without Jobs?]  But never let information get in the way of dogma - let's keep it simple: USA!USA! USA! (beat your fist on chest while chanting, please)

Specific to Germany, rather than having countless millions lose working skill sets sitting home unemployed for 26... 52...err 99 weeks, they enacted a subsidization program called "short time".  So government support was necessary (in both countries) but appears to have created much better effects in Germany.... and is being drawn down quickly.   I did an entire piece on this in summer 2009 [Jun 16, 2009: As Euro Zone Unemployment Spikes - Job Saving Measures Emerge; Completely UnAmerican]  Again, I want to stress these are 'lazy socialists' (who have a later retirement ages than Americans) and we can learn nothing for them, so if you read past this point, please purge your memory immediately.

  • Germany's unemployment rate dropped to 7.2% in September as the strength of Europe's biggest economy helped the labor market recover quickly from the crisis.  The unadjusted jobless rate was down from 7.6% in August.
  • "The good economic development continues to have a positive effect on the labor market," labor agency chief Frank-Juergen Weise said. "Companies' demand for labor is high."
  • "We have good chances of seeing a golden autumn on the labor market," Economy Minister Rainer Bruederle said. "The economic upswing is gaining breadth and reaching ever more people."
  • Even at the height of the economic crisis, a government-subsidized short-time work plan that allowed employers to reduce production without cutting employees kept the jobless rate in check
  • Under the so-called short-work plan, or Kurzarbeit in German, companies can temporarily move employees onto shorter working weeks to reduce costs during periods of weak demand. They pay only for the hours worked and the government provides up to 67 percent of the remaining wage.  The program supported up to 1.5 million employees at some 63,000 companies
  • The unadjusted rate peaked at 8.7% in February this year.
  •  "Second-quarter GDP data has shown that not just exports but also domestic demand is recovering strongly now."

So one country is looking to ever increase government assistance to unemployed or at best "keep it static" ... with no end in site to unemployment - whereas another country has recovered to the point it can reduce its government spending dramatically on such a program.  Whose program was smarter?

  • Recent months' figures have shown that the German labor market is resilient even as the short-work program's importance fades.  
  • The labor agency estimated that, in July -- the latest month for which it has figures -- 288,000 people were in the short-work program, 111,000 fewer than in June and down nearly four-fifths from its peak in May 2009.

Another "flexible" plan by the "unflexible" socialists.
  • Another tool that has played a central role in containing unemployment is the so-called work-time account used by about half of all German firms. This allows them to reduce employees’ working weeks during downturns. The hours saved accrue in an account and can then be used during booms without adjusting wages.

See the statement below.... the irony is incredible and you would not believe such words would come to represent a socialist state.
  • Germany's "labor market flexibility has enabled companies to respond to the upturn in global demand since mid-2009 quite rapidly, unlike in countries where staff has to be hired anew," Klein said.

So the German labor force has done (relatively) well all things considered.  Meanwhile the important thing in America is S&P 500 companies have surging profits - and profits in a select group of a couple hundred companies (aka 'people' per Supreme Court) is the most important gauge of domestic economic health.  Because without profits (at all costs), there can be no labor growth (in India and China) by American companies. ;)  Boo yah.

[Sep 22, 2009: BusinessInsider - The Real Problem is the Economy Does not Need you Anymore
[Jul 7, 2009: NYT - France Stimulus Projects, Unlike U.S. Were Shovel Ready
[Jun 30, 2009: Will Germany Transform Itself?  Does it Want to?]

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