Talking Over German (or West German) Unemployment Rates

This is one of those free-range essays I write....discussing an interesting topic of unemployment rates in Germany.

For reference, I use Trading Economics as the source of info.

When you go back to the period after WW II....the period of 1948 to the early 1950s....West German unemployment rates went to around 12-percent.  But as you get into the 1950s, and the construction boom that occurred, you can look at the trend line and see that it dropped year after year....to a low-point in the early 1960s of one-percent unemployment.

Yes, virtually everyone who wanted to work....found work. 

With one single period in the early 1970s where it doubled (to around 2.5-percent unemployment)....this was a remarkable period.

So around 1974, it went up to around four-percent.  Various tools and gimmicks were employed by the political machine at the time to 'repair' this....but it barely dropped it back down to 3-percent over a two-year period.  The glory period....was finished.

In the 1980s, it ranged from 6 to 8 percent unemployment.  In the early 90s, for a brief year or two, it came amazingly close to 5-percent.....then returned to around 10-percent in 2000.

So as the Merkel period started up....the trend for German unemployment (remember, this is a decade into a unified Germany)....Merkel's team was carving one-percent off the rate almost yearly.  By 2010, they were nearing 5-percent unemployment.

What you can generally say is that the 'peak' has been achieved and they probably won't see anything less than the five-percent often discussed these days.

What helped in achieving 5-percent?  For a fair number of Germans, not just the economists saying this, was the remaking of the welfare rules back around twenty years ago.  When they finished the new rules.....it didn't really pay to stay on welfare.  You were going to be making the absolute minimum in money.  This 'encouragement' (at least in the minds of most people)....helped to force people to seek employment, even if they were only making 10-to-20 percent more than welfare was paying.

So why is this recession chatter bothering some political folks? 

Well....unemployment would creep up....maybe to the seven-to-eight percent level, and the revenue tax machine would have problems in meeting the budget.  So the Germans have this law in effect (it's been around for 10 years).....they can only approve budgets that relate to the GDP, and can't borrow or go past that point.  If the recession occurs, and the revenue bucket is challenged.....they would be forced to cut the budget.  Where?  Oh.....that's the part of the law that was not detailed out.  You can imagine political folks standing there and having to make a decision to cut 5-percent of the approaching year's budget, and arguing for hours over the idea that roads and bridges will be cut, or education.

It's a curious path taken and why this recession chatter is growing in intensity.