The german labor market miracle: How the Government is creating such a low Unemployment Rate

We hate it to cheer every month again – that´s boring! The Unemployment rate (official unemployment rate) in Germany falls in November to its lowest level since 1991. With 2.368 million unemployed people there were 20,000 fewer unemployed than in October, and 163,564 less than in November 2016. That is an unemployment rate of 5.3%, after 5,4% in October and 5.7% in November 2016.

The number of “underemployed persons” of 3.3 million is down 8,000 from month to month, and down 148,033 year on year. Most of these “underemployed” are unemployed. But many of these unemployed people can be removed from the official unemployment statistics by the agency because it simply says: you are unemployed, but we simply do not define your status as unemployed! Affected are all long-term unemployed older than 58 years, all unemployed who are sick, all unemployed who are currently being kept in a “qualification measure” by the Agency, etc. But still all of this deleted persons are unemployed, but not in the statistics which are pusblished monthly to the press.


Headquarters of the german government labor agency “Bundesagentur für Arbeit” in Nuernberg. Photo: Bundesagentur für Arbeit

The number of vacant jobs registered with the Agency is also steadily increasing, to 779,712 posts from 773,105 in the previous month. The year-on-year growth is 98,599 vacancies. The surveys of the agency’s subsidiary “IAB” show that the number of vacancies actually exceeds 1 million – and the number is likely to be too profound, because only a fraction of employers are interviewed. Our annoying question: The vacancies are also plenty of jobs for the low-skilled. Why is it not possible to bring long-term unemployed people into these jobs? Who is to blame? Probably a question for philosophers!

The number of persons in employment was also published today by the German Federal Statistical Office at 44.6 million. An increase of 650,000 persons compared with October 2016 to October 2017. The unemployment rate published by this office (“Erwerbslosenquote”) stands now at very low 3.6%. Our note: This Unemployment (Erwerbslosenquote) is something completely different than the  Unemployment rate published by the Job Agency “Bundesagentur für Arbeit”. The difference between 5.3% and 3.6% is due to the fact that unemployed people defined by the Statistics office (Erwerbslosenquote) who are (in the Opinion of the Job Agencies) not actively seeking work, are deleted from this unemployment rate statistics. They are unemployed anyway – just not in the sense of the definition of this federal Statistics Authority. So you get the numbers pushed pretty far down! In the official EU comparison, we have only 3.6% “unemployed” in Germany! ! ! Unemployment (by EU standards “unemployment”) is thus only 1.55 million people in  Germany, a drop of 12,000 compared to the previous month.

For german media publications, we have 5,3% unemployed people, but when you include all the sick, old and trained people, the real rate will be round about 30% higher, at 7%. So the difference is getting larger and larger. 7% real unemployment in Germany, but officially for EU Statistics only 3,6%. This looks nice! Here is the official headline text of the Federal Labor Agency (Bundesagentur für Arbeit) on today’s labor market data (translated into English):

The labor market benefits from the good economic development. Employment subject to social security contributions and the demand for new employees continue to rise at a high level. The seasonally adjusted decline in unemployment and underemployment continued in November. Significant decreases have been reported compared to the previous year, although more people are finding themselves in unemployment and underemployment.

The following chart shows the creation and reduction of jobs by industry year-on-year (always delayed two months). More than ever, one sees: The german Job Wonder (miracle) is based on bad and very badly paid jobs in Service Industries. These people will have a very big financial problem when they retire! But we do not want to complain too much – job is job, right?

Refugees in Germany

Why is the number of unemployed people in Germany not exploding by hundreds of thousands of people? Because in 2015 and 2016 a large amount of Refugees came into the Country, who are now registered with the Federal Employment Agency. As always, the booking tricks of the agency are coming into play. Most Refugees are not considered as unemployed (even though they are unemployed). They´re classified as “underemployed” because they were booked into “qualification measures”. So it´s the same game as mentioned earlier in the text with the already existing unemployed. Quote Federal Employment Agency (translated):

The labor market integration of refugees will take several years. This is shown by the experiences of the past. The jobless report of refugees is a first step in an integration process, which will take longer because of the often lack of language skills and formal qualifications. Accordingly, it can be observed that the unemployment of persons from the main non-European asylum-receiving countries increased by 13,000 or 8 per cent in November compared to the previous year. A high use of integration courses and support measures has limited the growth of unemployment. Accordingly, underemployment, which takes into account the use of these measures, was estimated to be 66,000 or 18 percent larger than a year ago. At the same time, employment of nationals from the main non-European asylum-receiving countries has increased by 75,000 or 62 per cent in September.

Since June 2016, the previous reporting on nationals from the main asylum-receiving countries has been supplemented with reporting on persons in the context of refugee migration. As such persons asylum seekers, recognized persons entitled to protection and tolerated foreigners are counted. Thereafter, in November 2017, 175,000 refugees were registered as unemployed in Germany. Underemployment for these individuals is estimated at 420,000 in November.Compared to the previous year, the number of unemployed has risen by 15,000 or 9 per cent and that of underemployed persons by 72,000 or 21 per cent.

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