Unemployed growth versus unemployment jobs

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1. Overall development

The Federal Statistical Office announced the detailed results of the economic development in the 2nd quarter of 2010 today. As previously reported, the recovery in German economic output continued with growth of 2.2% in the 2nd quarter and 3.7% compared to the previous year. However, this rate is based on the base effect of a particularly sharp drop in the previous year. If one compares with the 2nd quarter two years ago, the economic output was still 2.0% lower (Fig. 14185, 14744).



The downside of the globalization that the Federal Government was constantly pushing forward through exports, even during the crisis, is now becoming more and more apparent. Although exports are climbing towards the pre-crisis level (Fig. 14192), they are increasing their dependence on foreign markets that are currently particularly uncertain.


Exports are growing above all thanks to the restriction of labor income imposed for reasons of competition and thus at the expense of private household consumption. But that is considerably more important than export for overall economic output.

The external contribution alone (export minus import) contributed 1.3 percentage points to the overall economic growth of 3.7% compared to the previous year. The other growth factors are more of a temporary nature and in any case not designed for the long term. A further 1.1% contribution to growth came from gross plant investments, but here the pent-up demand of the construction industry after the severe winter and the expiry of state construction programs played a major role. In addition, the stocks were filled again in the 2nd quarter (growth contribution 1.3 percentage points) and the economy benefited from government stimulus programs (growth contribution 0.5 percentage points). These circumstances alone show what kind of weak feet the German economy is still standing on.

The social gap between the development of net wages and salaries on the one hand and income from entrepreneurship and wealth continued to widen. Some saved for fear of the future, others were able to save easily because of their high incomes, and so the savings rate was again close to a record at 11.4% of disposable income.

The main results compared to the 2nd quarter of 2009 and the previous quarter are summarized in Fig. 04305 and 14818. The medium-term development by quarter is shown in Fig. 04004. It is particularly noticeable how much corporate and property incomes have already recovered and that in contrast to wages.




A brief analysis follows in a logical order.

2. Further deepening the social divide in terms of income

Corporate and asset incomes have recovered surprisingly quickly from the crisis, to which, above all, larger profits after savings in personnel costs and low financing costs have contributed. They increased by 22.0% compared to the same quarter of the previous year, which after deducting GDP inflation was still 21.1%. In contrast, net wages and salaries rose by only 3.8% and 2.7% after deducting the development of consumer prices (Fig. 14849). This includes the income of the better and best-earning employees up to the boss of Deutsche Bank. The normal wages of employees are likely to have developed even worse. And much of the small increase in employee income can only be explained by the expiry of short-time working, which is returning to normal work and normal wages.


Over the entire period since the first quarter of 2000, net wages and salaries per employee have fallen by 2.5%, while corporate and property incomes have expanded by 31.1% despite the slump in 2008. The decline in real labor income has been a permanent situation that has been observed for years, while the slump in corporate and property income was only a crisis-related and already temporary situation. The share of wages and salaries in German national income continued to fall in the 2nd quarter of 2010 (Fig. 04797). The decline since the summit of 76% in 1981 and at an ever increasing pace since 2000 is downright dramatic (Fig. 14636).



The federal government now expects the rift to deepen even further over the years up to 2014. According to the prognosis in the federal financial plan, the nominal annual average of employee remuneration is to grow by 2%. Since the ECB is aiming for an inflation rate close to 2%, that would be absolute stagnation in real terms. In contrast, corporate and property incomes are expected to rise annually and nominally by 4.5%, which would correspond to a real increase of 3.5% given the GDP inflation of 1% assumed in the financial planning. By 2014, employee remuneration would have decreased by 3.7 in real terms since 2000, while corporate and property income would have increased by almost 47% (Fig. 14045). In fact, corporate and property incomes are currently rising much faster than assumed in the financial planning, namely at an annual rate of 21% instead of just 3.5%.


3. Productivity

The productivity per working hour has risen again with the reduction in short-time work (Fig. 04730).


4. Development of the consumer economy

Private consumer spending has stagnated with little ups and downs practically since the last quarter of 2006. Although it increased by 0.6% compared to the previous quarter, it fell by 1.3% compared to the previous year (Fig. 14010). This is a very weak picture even in an international comparison and has to do with the slowdown in labor income development in Germany.


5. Investing

In the second quarter of 2010, gross capital investments increased by 4.7% compared to the previous quarter and were also 5.9% above the previous year's figure. Compared to the summit in 2007, however, critical equipment investments were still 18% less (Fig. 14754).


6. International comparison

In comparison with other countries, the German development only looks particularly impressive compared to the previous year, because German economic output plummeted particularly deeply. (Fig. 15594). In comparison with the normal quarter two years ago, it looks quite different (Fig. 15267).



This is all the more true if you place the snapshot from the 2nd quarter of 2010 in the historical context of the development since 2000 (Fig. 15249). Among the 17 comparison countries (old EU, USA and Switzerland), Germany took 14th place in the period from 1st quarter 2000 to 1st quarter 2008, only undercut by Italy, Portugal and Denmark. This sequence has not changed for the period up to the 2nd quarter of 2010 either. Because the now acclaimed increase in economic output in the 2nd quarter of 2010 only makes up for the particularly severe crash that Germany suffered between the 1st quarter of 2008 and the 1st quarter of 2009, when it slipped to the penultimate place.


7. Outlook

It will now have to be seen how the German economy will develop further after the inventory build-up and the expiry of the state programs. In view of the extremely one-sided dependence on exports, this will primarily depend on developments in the partner countries. Some are currently experiencing a relatively weak development compared to the previous quarter, e.g. Italy 0.4%, Spain 0.2%, Greece -1.5%. Portugal (0.2%) and Ireland also have to consolidate. Germany's most important trading partner, France, saw growth of 0.6%. In the USA, the recovery is currently weakening significantly. The American external balance situation, especially with China, is becoming more precarious again (Fig. 05233), so that trade policy disputes with negative repercussions on world trade can no longer be ruled out.


When the SPIEGEL-online headlines: "Record upswing - growth of over three percent is unavoidable" and then writes: "The dynamic of the upswing is overwhelming even the professional world: The DIW business institute has corrected its forecast drastically upwards. DekaBank is almost euphoric - and sees it already the chance of a German decade ", then one should ask whose decade this is really going to be. So far it looks at best like one of the German corporate and property incomes, but not after a decade with which the vast majority of employees could befriend. But even that is anything but certain.


global news wb22.50 25-08-10: Asia comes with power

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The severe global economic crisis passed Asia without causing any major damage. Three factors have played a decisive role in this. First, banks in Asia have been properly regulated, preventing them from speculating in the high-risk products that have broken the backs of many Western banks. Second, most of the Asian countries had learned from the East Asian crisis of 1997 and 1998 and built up huge foreign exchange buffers that reached more than 60% of the world's currency reserves. When Western export markets temporarily failed, these gigantic reserves made it easier for them to take countermeasures with government investment programs without reaching debt limits. And thirdly, Asian countries are trading more and more among themselves and are therefore less dependent on Western export markets. The top ten countries (excluding Japan) increased their export share to other emerging and developing countries (including oil countries) to over 63% of their total exports by 2009.

As a result, according to a report by the Financial Times, the Asian economies (excluding Japan) have been able to keep increasing their growth lead over the developed economies of the G7 (Fig. 15251). The average growth rate for 2009 was 5.8%. Chinese industrial production is again recording growth rates of around 15% compared to the previous year (Fig. 08199), investments at a similar level (Fig. 08089). The Indian one is also growing by more than 10% (Fig. 08200). Economic growth of 8.6% is expected for Asia and Australia (excluding Japan) in 2010, the highest rate in 20 years. China has now outperformed Japan in its second quarter and is expected to be the world's second strongest economy after the US this year.





In the meantime, exports have also picked up speed again (Fig. 15252). The Chinese export surplus recorded the fourth highest monthly value ever recorded in July (Fig. 08198). Chinese exports to the USA increased by 30% in the first 7 months of 2010 compared to the previous year. With a rate of increase of more than 20% in the first quarter of 2010 compared to the previous year, China became Germany's main supplier country and achieved a high export surplus (Fig. 08178).




The currency reserves of the six Asian countries with the largest reserves were in May 2010 at 4.5 trillion dollars (Fig. 15250, 08188), that is more than half of all world currency reserves of 8.3 trillion dollars. To give an idea of ​​the size of the Chinese foreign exchange reserves: They are five times larger than the market value of all listed German companies in the middle of last year or seven times larger than the top 15 German companies.



Now Asia comes with power with both modern industrial products (especially China) and services (especially India) as well as finances to buy up companies and technology. When it comes to exports, the lowest wages help, not infrequently forms of unfair dumping and - especially in the case of China - a downwardly manipulated exchange rate. Long gone are the days when the wave of exports came from clothing and shoes or other simple products. More than half of the imports from China today are data processing equipment, electrical and optical products, machines and electrical equipment (Fig. 08122).


Now China is increasingly looking to invest in Western companies and funds. For this purpose, the China Investment Corporation (CIC) was created in 2007, with an initial capital of 300 billion dollars. With its investments, China is not only looking for better profits than can be achieved with American government bonds, but also access to technology and raw materials in order to further accelerate its own development process. Chinese state-owned companies and private companies, in which the CCP has a lot to say, are purposefully investing in western foreign countries. BAIC has acquired technology from Saab, Geely acquired the Swedish luxury company Volvo and the British luxury companies Rover and MG are already Chinese. In the PC sector, Levotno bought the computer division from IBM.

In a further wave, the large Chinese mechanical engineering groups are now investing in Europe, not least in Germany. Solar energy companies like Yingli have already overtaken their German competitors in the global top position. The Danish and German (Siemens) top companies can also be expected to be replaced in the wind energy sector. Sany, China's largest mechanical engineering group, is pulling up a concrete pump company near Cologne. As early as 2006, Sany replaced the German company Putzmeister as the world's largest concrete pump company. Zoomlion, another manufacturer of concrete pumps from China, swallowed the Italian manufacturer Cifa two years ago. The German market is of particular interest to Chinese mechanical engineering companies because there is immediate global recognition of those who can assert themselves here in the market that is regulated by many technical regulations. The German mechanical engineering sector has a particularly medium-sized structure and will have a hard time against Chinese competition. Chinese companies sold machines worldwide for 300 billion euros last year, while German companies only sold machines for 178 billion euros.

And Asia comes with power in another area: in the fight for raw materials that are becoming rarer. Again, it is above all China that, with its gigantic foreign exchange reserves, is buying everywhere. In particular, gallium, germanium, beryllium, indium, magnesium, platinum, etc. are indispensable in the manufacture of high-tech products. On the other hand, China has imposed drastic export restrictions on some raw materials. These are rare earths, 95 percent of which are extracted in China. The government in Beijing is also planning to ban the export of some raw materials entirely by 2015. But German industry is also dependent on the equally competitive access to base metals such as aluminum, copper, zinc and tin. B. electric motors, miniature pacemakers and offshore wind turbines are unthinkable.

Conclusion: Germany, which is heavily dependent on exports, will have to dress warmly.


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global news wb22.49 24-08-10: A German mass fate: 50plus, unemployed, sick and (soon) retired at 67

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Last year Germany had around 15.5 million people between the ages of 50 and 64, almost one in five in Germany. Of these, two-thirds, 10.7 million, had some sort of job, many of them fairly artificial in queues or on a low-wage basis. However, employment decreases significantly with age. In the age group from 60 to 64 years, only just under 38% have a job (Fig. 14288).


This analysis of the fate of Germany is about those willing to work without any job, not even in queues or on a low-wage basis. Officially, only 916,000 older people were counted as unemployed in 2009. Among the much larger remainder of the total of 4.8 million without a job, there are, of course, very many who are not at all interested in work. Let us assume that there are around two million older people who would like to work but cannot find a job.

The proportion of older people aged 60 and over among all unemployed is drastically reduced, which documents the process of discarding (Fig. 14290). This is particularly evident when you compare it with the population ratio (Fig. 14291).



Among the officially counted unemployed, those over 55 years of age have a particularly high share of long-term unemployment over one year at 41.8%, while the average for all age groups is 29.7%. Despite many manipulations of the statistics, especially among older people, their share of the unemployed has risen steadily over the last few years (Fig. 14289).


In an international comparison, the unemployment rate among older people is particularly high, the highest for many years and only now exceeded during the crisis in Spain, Portugal and Ireland (Fig. 15244, 15245).



In Germany in particular, many older people are so burned out that they have to retire from working life or are forced out. At 62.1 years (men), Germany ranks among the countries with a relatively early effective retirement age (Fig. 15246).


The psychosocial burdens of unemployment have preoccupied the social sciences since the last great global economic crisis of 1929. Now the DGB has commissioned a study on the effects of unemployment on health. Existential material worries and increasingly limited opportunities for financial action have an impact on mental and physical health, as do the exclusion, devaluation and social stigma associated with unemployment.As a result, the unemployed are on average far more likely, sometimes twice as often, to be ill than those in employment.

The longer unemployment lasts and the lower the prospects of re-entry, the more stressful the situation becomes for those affected and their families. A total of 45% of Hartz IV recipients say of themselves that their health is in poor health.

Representative figures on incapacity for work are contained in the evaluations of the last microcensus with health issues from 2005. They show how the sickness rate increases, especially among the long-term unemployed (Fig. 14284).


The sickness rate among employees in the 15- to 24-year-old group is 3.0%, but among jobseekers it is 4.4%. The difference increases with age: in the group of 55 to 59 year olds, the unemployed are sick around 2.2 times as often as the employed; their sick leave rate is 15.2% (Fig. 14285). The difference is even clearer for illnesses lasting more than a year (Fig. 14286).



For unemployed people in the Hartz IV system, the health insurance companies have insufficient or no data on incapacity for work. However, the analysis of the usable health insurance data also shows a higher risk of illness compared to employed people and a significant burden on the unemployed. Compared to employees, unemployment benefit (ALG) -I recipients, with almost 26 sick days, now have more than twice as many days of incapacity for work. Unemployed people have by far the highest sickness rate of all insured persons. Since it can be assumed that unemployed people mostly do not report sickness in the event of shorter illnesses, the case numbers for incapacity for work are even signed earlier. The number of cases of inpatient treatment is considered to be particularly hard data: Compared to employees, ALG I and ALG II recipients had to undergo treatment in hospital twice as often and spent 2.8 times the time in inpatient treatment (Fig. 14287 ). The treatment of mental illnesses makes up the largest share here.


Assuming that the unemployed but willing to work between 55 and 65 years would be around 2 million and the sickness rate around 14%, there would be around 300,000 sick victims of the labor market in Germany alone in this age group - a German mass fate, even if some of them die Causality should be oriented from illness to unemployment.

For the psychological consequences of unemployment see also here.


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global news 2113 24-08-10: Detailed results for the second quarter of 2010: The social divide is getting deeper and deeper

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The Federal Statistical Office today announced the detailed results of the national accounts for the second quarter of 2010. One result is particularly striking, namely that the social divide is getting deeper and deeper. This applies not only to those living in the social exclusion of long-term unemployment, but also to the difference in the development of net wages and salaries on the one hand and income from entrepreneurship and assets on the other.

Corporate and asset incomes have recovered surprisingly quickly from the crisis, to which, above all, larger profits after savings in personnel costs and low financing costs have contributed. They increased by 22.0% compared to the same quarter of the previous year, which after deducting GDP inflation was still 21.1%. In contrast, net wages and salaries rose by only 3.8% and 2.7% after deducting the development of consumer prices (Fig. 14849). This includes the income of the better and best-earning employees up to the boss of Deutsche Bank. The normal wages of employees are likely to have developed even worse. And much of the small increase in employee income can only be explained by the expiry of short-time working, which is returning to normal work and normal wages.


Over the entire period since the first quarter of 2000, net wages and salaries per employee have fallen by 2.5%, while corporate and property incomes have expanded by 31.1% despite the slump in 2008. The decline in real labor income has been a permanent situation that has been observed for years, while the slump in corporate and property income was only a crisis-related and already temporary situation. The share of wages and salaries in German national income continued to fall in the 2nd quarter of 2010 (Fig. 04797). The decline since the summit of 76% in 1981 and at an ever increasing pace since 2000 is downright dramatic (Fig. 14636).



The federal government now expects the rift to deepen even further over the years up to 2014. According to the prognosis in the federal financial plan, the nominal annual average of employee remuneration is to grow by 2%. Since the ECB is aiming for an inflation rate close to 2%, that would be absolute stagnation in real terms. In contrast, corporate and property incomes are expected to rise annually and nominally by 4.5%, which would correspond to a real increase of 3.5% given the GDP inflation of 1% assumed in the financial planning. By 2014, employee remuneration would have decreased by 3.7 in real terms since 2000, while corporate and property income would have increased by almost 47% (Fig. 14045). In fact, corporate and property incomes are currently rising much faster than assumed in the financial planning, namely at an annual rate of 21% instead of just 3.5%.


This uneven development, which is also taking place in other countries and is currently exacerbated by the crisis, can actually only end in an even more severe crisis of the entire economic system than we are currently experiencing. Without adequate mass purchasing power, the sales markets of the old industrialized countries will increasingly dry up, whereby this will also apply to export markets, as they are still being exploited by German industry.

The new weekly letter, which can be ordered here free of charge, provides a detailed analysis of the economic situation in the 2nd quarter.


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global news 2112 23-08-10: The American trade balance increasingly in the red: How much longer until high noon?

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Despite the high indebtedness of American consumers, foreign suppliers, especially from China and the EU, are pushing more and more into the American market and are pushing the already precarious trade balance more and more into deficit, with more and more American jobs being lost at the same time (Fig. 0302).


In the second quarter of 2010, the US had a deficit of $ 132 billion. China and the European Union alone accounted for two thirds of this (Fig. 05233).


The USA will not be able to tolerate this development for long without countermeasures. Since the surplus countries, above all China and the EU, work with maximum wage discipline and weak exchange rates, the only option left for the USA is special tariffs and quantity restrictions. Both measures would violate international trade rules and thus trigger a trade war. Greetings from the 30s.

Even if a trade war is limited to China, Germany will also be affected, because behind Chinese exports to the USA there are a considerable number of German machines and equipment.


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global news 2111 22-08-10: The blackmail has worked: Diluted core capital regulations for banks

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The international committee of bank inspectors, which is working out new standards under the name Basel III, has with its last proposal watered down the originally planned requirements for the core capital of the banks. Up to a share of 15% expected tax credits, fee income from the management of mortgages and investments in other institutions can now be counted as core capital. Originally, such forms of dubious capital were to be excluded, which would have reduced the average core capital ratio of the 16 largest European banks by EUR 300 billion from 9% to 5.3% of total assets. With the dilution, the average core capital ratio only drops to around 7% (Fig. 16142). The minimum core capital level is only to be 3%, so that the banks currently have a considerable cushion of core capital without raising any further capital. In addition, there are dilutions of other originally envisaged conditions for maintaining liquidity. But even this package is still blocked by the German federal government as the only government.


Despite the years leading up to full entry into force, the banks have apparently put pressure on the governments to argue that the crisis has not yet been adequately overcome. This is getting rather strange now, however, after the Basel Committee has examined the relationship between core capital regulations and economic development in a joint study with the Financial Stability Board. The study came to the conclusion that for every 1% more core capital requirement, economic development will not be affected by more than 0.2% in any of the years examined.

The Basel Committee on Banking Supervision has now also proposed that lenders also have to participate in the rescue of systemically important banks if their loans are to be included in equity. This is a hybrid of equity and debt capital that is used by many, and especially by German banks, as hybrid capital in order to meet regulatory requirements. In the future, only those financial instruments should be counted in the capital cushion of the banks that also bear losses. In this way, the financial watchdogs want to prevent investors from being left unscathed while the state alone saves the banks. However, the committee has waived a general ban on the inclusion of hybrid capital such as subordinated bonds or profit participation certificates. Instead, they have proposed that when the hybrid financial instruments are issued, it is stipulated that they will expire in an emergency or be converted into conventional equity. It remains to be seen, however, whether this proposal will not also be torpedoed by individual governments, especially the German one.


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global news 2110 21-08-10: The federal government expects a sharp drop in wages and salaries up to 2014 as well

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Over the years from 2000 to 2009, employee remuneration lost 3.7% of its value in real terms - i.e. after deducting consumer price inflation. In contrast, corporate and property income after deducting the GDP inflation rate rose by more than 23% (Fig. 14045). The social divide in Germany has become deeper and deeper, despite the crisis-related decline of some assets.


The federal government now expects the rift to deepen further over the years up to 2014. According to the prognosis in the federal financial plan, the nominal annual average of employee remuneration is to grow by 2%. Since the ECB is aiming for an inflation rate close to 2%, that would be absolute stagnation in real terms. In contrast, corporate and property incomes are expected to rise annually and nominally by 4.5%, which would correspond to a real increase of 3.5% given the GDP inflation of 1% assumed in the financial planning. By 2014, employee remuneration would have decreased by 3.7 in real terms since 2000, while corporate and property income would have increased by almost 47%. Brave new and old world!


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global news 2109 20-08-10: The Chinese puzzle

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China is about to overtake Japan in economic strength. But official dollar values ​​are compared. In the Chinese case, they have been pulled down significantly by the exchange rate manipulation. If one compares the purchasing power of the currencies on a dollar basis and according to the data from the International Monetary Fund, China overtook Japan about 10 years ago and is now well on the way to catching up with the USA. The gap to the USA has already narrowed over the last 10 years from 30.3% to 65.6% of American economic output (Figs. 15265, 15266).