French Industrial Output June 2007

Hard to know how to read this latest data from France. Obviously someone somewhere is feeling the pressure:

Industrial production in France, Europe's third-largest economy, unexpectedly fell in June, led by declines in the output of cars and consumer goods.

Production at factories, utilities and mines dropped a seasonally adjusted 0.5 percent from May, when it rose a revised 0.5 percent, Insee, the national statistics office, said today in Paris. Economists expected a gain of 0.4 percent in June. For the second quarter, industrial output fell 0.3 percent from the prior three months and was unchanged from a year earlier.

Higher interest rates and increased energy prices are weighing on consumer confidence in France at a time when the euro's advance to a record against the dollar and the yen last month threatens to curb exports. France's economic growth is trailing behind the euro-area average for a third straight year.

Germany Part and Full Time Work

Source Bundesbank


According to the Economist


Zeitarbeit, as temporary work is known, accounts for 1% of all jobs, but for perhaps more than half of all those created in the past year. One example of the new breed of employers is time & more, which specialises in health care. It has around 400 people on its books, of whom 300 are nurses; two years ago it had 250. Its founder, Bernd Sydow, who sold his firm to Adecco in April, says that it supplies almost all Berlin's hospitals as well as hospitals in other big cities. Around three-fifths of time & more's nurses are called on for stints of one to three days, often at short notice. Having reduced permanent staffing levels and carrying no reserves, hospitals turn to the agency as their requirements fluctuate. Mr Sydow reckons that eventually about 5% of his clients' nurses will come from an external pool.

Agencies such as Mr Lüngen's, in contrast, do not employ those for whom they find work, as Zeitarbeit firms do, but act as brokers. Last year such firms filled 62,000 jobs in the primary labour market, three times as many as in 2002. As well as running his own agency, Mr Lüngen runs his industry's biggest trade association (there are a handful), whose membership has risen from 23 when it was founded in November 2003 to more than 200.

Regulatory reforms explain only part of the change in the labour market. As companies have come under more pressure, workers' pay has been squeezed: as higher returns on capital have been demanded, the relative price of labour has had to fall. That managers can threaten to move work to central Europe or even farther away has strengthened capital's hand. As a consequence, while company profits have risen steeply, workers have done much less well. In the past six years, the share of wages in national income has fallen from around 60% to little more than 55%.

In part, this has come about through a loosening of Germany's system of industry-wide wage deals between employers' representatives and trade unions. This corsetry was never quite as rigid as it looked: variations on centrally struck wage deals at local level and in individual companies were already part and parcel of it.

However, agreements have become more flexible, notably since 2004. Martin Leutz, a spokesman for Gesamtmetall, the engineering employers' federation, refers to a “huge breakthrough” in that year's wage round, allowing companies to deviate from agreed terms on pay, bonuses and hours if this would secure or create employment, or keep investment in Germany that would otherwise go elsewhere—albeit with the agreement of workers' representatives. More and more companies, especially in eastern Germany, have chosen to bypass the central system altogether.

Moreover, negotiated settlements have been modest. Actual pay rises, indeed, have lagged behind inflation for several years. This year it looked as if labour might at last regain some of its old bargaining power, at least in the metal industries. IG Metall, the country's biggest union, demanded a 6.5% rise from the end of April. When Gesamtmetall said no, the union called short warning strikes.

The eventual settlement, reached in early May, covers 19 months, promising 3.9% in the first year and a further 2.1% in 2008, which can be postponed for up to four months. The average annual cost for the duration, according to Gesamtmetall, is 3.3%. That was the unions' best result for several years. With inflation at 1.9% it amounts to a real increase. But not a big one; and the metal industry has been doing particularly well, with export demand riding high. Workers elsewhere are unlikely to see their pay rise by as much.

Bundesbank On German Labour Market

An analysis restricted to the number of persons in work is of no more than limited informative value, however. For example, the relatively favourable growth in per capita employment in Germany is due exclusively to what was – even in international terms – a sharp increase in jobs with reduced working hours, in particular, the expansion of “minijobs” in two surges from 1997 to 1999 and from 2003 to 2004. This idiosyncratic effect is also reflected in the average annual working hours of part-time workers, which has been falling in Germany over the past few years and is now clearly below the euro-area average. Furthermore, there has been a comparatively strong increase in the percentage of part-time workers who would actually prefer longer paid working hours.3 In this respect, the sharp increase in jobs with a small number of working hours in Germany points to structural problems in the labour market. The total number of hours worked in the economy as a comprehensive measure of labour utilisation does show a comparatively sharp decline for Germany (-314%) in the period under review. According to OECD estimates, the total number of hours worked in Germany’s European partner countries has, by contrast, increased (ranging from 314% in France to 37% in Ireland). The figure went up by 912% in the USA and as much as 7% in the United Kingdom.