Dutch and German unemployment has been rising in 2012, but not as strongly as I predicted last year. Germany had hard time mid-year, but improved since then. Dutch labor situation deteriorating.

Today, the Dutch statistical bureau CBS presented its unemployment data for November, 2012:

Unemployment rate climbs to 7% 

• Unemployment growth 100,000 relative to one year ago 
• Increase WW benefits by over 12,000 
• Sharp increase WW benefits in sectors agriculture, hotels and restaurants and construction 

According to the most recent figures released by Central Bureau of Statistics (CBS), unemployment adjusted for seasonal variation increased by 16,000 in November 2012 to reach 552,000, i.e. 7% of the labor force.

Figures published by the Institute for Implementation of Employees’ Insurances show that the number of unemployment (WW) benefits rose to 322,000 in November, an increase by more than 12,000 relative to October.

Unemployment considerably higher

Unemployment increased by nearly 100,000 within twelve months. In November this year, 7% of the labor force were unemployed versus 5.8% on November 2011. The youth unemployment rate rose to an alarming 13.7% and more than 6% of over-25’s were unemployed.

The number of unemployed increased by an average 13,000 a month during the past three months. More than half were people older than 45. In October and November, unemployment among over-45’s rose more rapidly than in the preceding months.

Unemployment rate among young people substantially up

The number of current WW benefits grew by 4% to 322,000 in November. With a 13% increase, the number of unemployment benefits paid to young people under the age of 25 grew above average.

In December 2011, I wrote my outlook for 2012.  In this particular outlook (part 2), I was quite negative upon the Dutch labor market and slightly less negative upon the German labor market.

Unemployment

I’m very clear about unemployment. In 2012, I suspect it to rise by at least 3%-4% in The Netherlands and by about 2% in Germany. Rising unemployment will probably even be higher in the other Euro-zone countries, where the PIIGS will probably be the negative outliers; not only in sheer numbers, but also in the%age of increase.

Many companies, like the one that I work for, wrote red figures over the last three years since 2008. And although some companies still managed to make a decent profit during this period, I don’t expect the Dutch companies to maintain their excess personnel when the current recession proves to be a nasty one. The period of mass lay-offs that I noticed during this year has only just started, is my conviction.

And while Germany is currently still the ‘golden child’ in Europe with its massive exports all over the world, I cannot imagine that it can maintain this status in 2012. Germany will have to step back slightly and this will have immediate consequences for the German employment situation.

Today, at the end of 2012, I can say frankly that I have been much too pessimistic on both The Netherlands and Germany.  

Here are the charts for The Netherlands and Germany:

Dutch unemployment November 2011 - November 2012
Data courtesy of www.cbs.nl
Click to enlarge

German unemployment November 2011 - November 2012
Data courtesy of www.destatis.de
Click to enlarge 

In The Netherlands (data courtesy of www.cbs.nl), the unemployment rose by “only” 1.2% y-o-y, instead of the 3%-4% that I predicted. However, the unemployment among youngsters rose by 3.5% y-o-y, which is quite significant.

The German unemployment (data courtesy of Destatis.de) rose by only 0.1% y-o-y, in spite of it being 1% higher in January, 2012. Although the German youngsters seemed to have a hard time in especially the holiday period with a relative increase in youth unemployment of almost 40% in August 2012, the end result was quite good. In November, 2012, the y-o-y relative increase was only 5%.

The 3.5% rise of Dutch youth unemployment is absolute data. In relative data, it is 37%, much more than the 5% relative increase in Germany.

The German economy proves once again to be the powerhouse of the European Union. Although the crisis is also far from over in Germany, the largest economy in Europe seems to survive it without blinking. This is mainly due to Germany's strong large and small (artisanal) industries, the undisputed quality of its products and its world-wide exports that protect the country from the dire situation in problem zone South-Europe (i.e. the peripheral zone, where the PIIGS countries lie).

If you compare the data from both statistics bureaus, the current unemployment situation in Germany is even better than in The Netherlands, formerly the number two behind Austria when it came to unemployment. 

The Netherlands, with its large focus on exports to the PIIGS countries, suffers heavily from the difficult situation in South-Europe and the deteriorated circumstances on the domestic consumer market.

The fact that I have been too pessimistic on the Dutch unemployment situation doesn’t mean that this situation is actually healthy now: over the last three months the number of unemployed increased by 13,000 per month and this number might rise further, is my assumption:

• General consumer trust is at a very low level these days; this will definitely have repercussions for the numbers of shops and business-to-consumer companies in The Netherlands. Combined, this industry is a very large driver for jobs;
• Transport and distribution, a very important employer in The Netherlands suffers from the dropping exports to the PIIGS countries;
• The building and construction industry is going through a very hard time with soaring numbers of defaults and soaring unemployment. There is not even a shade of a solution for this battered industry;
• The ICT consultancy industry suffers from declining fees and numbers of assignments, especially in the financial industry. Important companies, like Logica, Ordina, Cap Gemini and others have to battle for every percent of margin;
• The financial industry is going through a period of mass dismissals and terminated contracts for temporary workers and consultants at ING, Rabobank, ABN Amro and SNS Reaal. Especially the financial situation of SNS Reaal is dire. The situation at the large Dutch insurance companies like ASR, Aegon and Delta Lloyd is hardly better;
• Also the Dutch manufacturing industry reports rising unemployment.

On top of that, there is a snag with the Dutch data: the increasing number of freelance professionals or ZZP workers (i.e. independents without personnel) that don't have an assignment does not count in any unemployment statistics.

Most freelance professionals work in the ICT industry and in the building and construction industry: the former are almost always very well educated (university or college level) and might still have a reasonable outlook for a job, while the latter are more often low-educated and work in an industry that sits on its knees.

If these ZZP workers dont have a job or an assignment, they will neither be counted as unemployed persons, nor will they receive unemployment benefit or welfare. The consequence is that this may be a group of people with (probably large) hidden unemployment and (in this case) grave financial problems; as they don’t receive any unemployment benefit and mostly have a hard time in qualifying for welfare benefit, there can be serious hidden poverty within this group.

Officials fear that the group of unemployed freelancers is already quite large and fast-growing. It would alter the Dutch unemployment rate considerably when the unemployed freelancers would have been counted in the official statistics.

The following article comes from a staff member of the Dutch Christian labor union CNV and sheds some light on the hidden unemployment and poverty of the ZZP freelancers. Here are the pertinent snips of this article:

Redefine the concept “ZZP worker”

‘Keep freelance professionals out of the Collective Labor Agreement (in Dutch: CAO)’. This message was spread by chairman of the PZO (i.e. platform of independent entrepreneurs) Esther Raats-Coster. The punchline of her story: more and more collective labor agreements have agreements on the fees of freelance professionals. This is an undesirable situation, according to Raats-Coster.

“What people seem to forget is that declaring CAO-conditions applicable to freelance professionals has a large impact on the freedom of the freelance professional as an independent entrepreneur. They are forced in an off-the-peg labor agreement: something that most zzp workers actually tried to escape from.“ This was stated by Esther Raats-Coster.

What Mrs Raats fails to mention in this article, is that this treasured freedom is worth nothing without an assignment.

In a report, called ‘the face of poverty’ (i.e. Armoedesignalement) from the Dutch Social-Cultural Planning Bureau and the CBS, it became clear that the number of poor people rose in The Netherlands during 2012 and will remain rising. For the first time, the number of poor freelancers is larger than the number of poor people working in paid employment: 175,000 vs 170,000.

This is a remarkable and worrisome given. To put it even stronger: although the unemployment is soaring currently, the growing group of freelance professionals with insufficient income keeps the official unemployment data low. They are not looking for a job, don’t apply for unemployment benefit and thus remain outside the unemployment radar. Even when they hardly can make ends meet.

Some freelancers still have a good assignment and thus enjoy a steady and considerable income. A growing group of freelancers is not so lucky: these are f.i. freelancers that cannot distinguish themselves from the others in the market. Or freelancers that are active in an industry with a high supply of labor and a low demand. Then the principle is: “if you leave, ten others are ready to work for me”.  

This puts pressure on freelance tariffs in industries with an excess in jobs that don’t demand any qualifications (“easy” labor). It puts also pressure on the wages of people that yet have a fixed contract.

This article is a must-read: even for people that are not big fans of labor unions. If you read Dutch or use Google Translate, please click the link.

In my opinion 2013 will be as much a nasty year for employment as 2012 has been. Perhaps, even nastier. Making predictions, however, remains difficult.