As the global economy continues to hemorrhage, unemployment in Germany dropped slightly to 8.2 percent in May from 8.6 percent the previous month, according to new figures from the Federal Labor Agency. This represents an increase in the number of unemployed by just 1000 on a seasonally adjusted basis.

Typically unemployment drops in May as the weather improves and seasonal work, including construction, picks up. So, the virtual standstill this May is hardly good news in comparison to recent years. In May 2008, the ranks of the registered unemployed shrank by 180,000.

The new figures come amidst Germany's worst recession since World War II.

This month's figures were distorted by a new rule requiring the agency not to count as unemployed those people who are being re-trained within a company.

"As the severity of the recession has become clear, government incentives to maintain headcounts and cut hours have become increasingly ineffective," warned Jennifer McKeown, a Capital Economics economist.

German measures against crisis losing steam

The Federal Labor Agency also documented the soaring numbers of those placed on so-called Kurzarbeit. These workers receive take-home pay comprising two elements: Their employer pays only for the hours they actually work, while the agency pays a subsidy on top. In the case of a worker with family the agency provides for 67 percent of the net salary shortfall. For singles its top-up is 60 percent of the net shortfall.

The labor agency reported 452,000 new registrations of workers on reduced hours in April, 679,000 in March and 721,00 in February. It estimates that at least another 270,000 joined in May.

The most recent data indicates that in March 1.2 million workers received salary subsidies from the government to make up for their reduced hours.

German experts think this reduced hours program has thus far blunted the impact to the workforce of the economic crisis and continues to slow the shedding of jobs. But Heinrich Alt, a member of the labor agency's board of directors, is worried that the program won't be enough to maintain job security in the long run.

"As the crisis continues and the number of unemployed increases as expected, we will have to consider broadening our approach with other tools," Alt told the Berliner Zeitung, a Berlin daily.

If companies are no longer able to afford even the reduced hour workers, they will have to consider layoffs, Alt said. In that case, transitional companies, where employees continued to be paid while they are re-trained or seek out new employment, would be the best way to buffer the layoffs.

Young workers without job training who find themselves unemployed should be given apprenticeships or be given a second chance to enter vocational training, Alt added.

hf/AFP/AP/Reuters
Editor: Chuck Penfold