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16.12.2015 • 45/2015

German Economy: Strong domestic demand compensates for weak exports

The upturn of the German economy is expected to gain further momentum as a consequence of strong domestic demand. Real gross domestic product is expected to increase by 1.6% in 2016. Consumer prices are expected to rise by 0.9%. Unemployment is expected to rise slightly because it will take time to integrate refugees into the labour market.

Oliver Holtemöller
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03.12.2015 • 44/2015

Migration Affects Labour Market in Eastern Germany

Migration increasingly affects the labour market in Eastern Germany, having effects on employment and unemployment figures as well as the number of recipients of social assistance benefits under the SGB II regulations. Particularly with countries in Middle and Eastern Europe, countries affected by the European debt and confidence crisis and with people seeking asylum, there are large increases meeting the dimensions in Western Germany. However, migrants overall still form a significantly smaller percentage of the population and other labour market parameters in Eastern Germany, since migration was a lot stronger in Western Germany during the last decades. While on the short run negative effects on unemployment have to be expected, there are also chances, in the medium- and long-term, to soften the expectable demographic problems, if integration and qualification are supported.

Oliver Holtemöller
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Firm Exit and Job Displacement – ein Workshopbericht

Daniel Fackler
Wirtschaft im Wandel, No. 4, 2015
Abstract
Die Abteilung Strukturwandel und Produktivität des IWH veranstaltete am 17. und 18. Juli 2015 einen Workshop zum Thema „Firm Exit and Job Displacement“. Dabei trafen sich hochkarätige Forscher (u. a. von der University of California Berkeley und der Harvard University) aus zahlreichen Ländern, um aktuelle Arbeiten zu Themen wie Unternehmenswachstum und Beschäftigungsstabilität zu diskutieren. Kernthema des Workshops war jedoch die aktuelle Forschung zu den Folgen unfreiwilliger Arbeitsplatzverluste (job displacement).
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EFN Report Summer 2015: Economic Outlook for the Euro Area in 2015 and 2016

EFN Reports, No. 3, 2015
Abstract
External conditions for the euro area economy are still favourable, albeit somewhat less so than at the beginning of the year. Oil prices are by more than a third lower than they were on average in 2014, but about 10 USD higher than in January. Long term interest rates are still very low, but by half a percentage point higher than in January. Worldwide growth in production and trade has disappointed in the first quarter of 2015, and recent leading indicators point to no more than a slightly faster expansion of world production for the rest of the year. The risks of contagion from the Greek crisis to the partner countries appear limited, because financial exposure to the Greek banking sector has been very much reduced. The EU nowadays has instruments with considerable power to fight losses of confidence, and the other countries that received financial assistance in the euro crisis appear politically much more stable, and their economies (including that of Cyprus in the first quarter of this year) have started growing at quite satisfactory rates. According to our forecasts, the euro area GDP will grow by 1.6% in 2015 and by 2.1% in 2016, as negative factors slowly become less important. Both private consumption and investment will expand at a good pace, and the unemployment rate will diminish, but still remain above 10% by the end of 2016. The main risk is that the Greek crisis has a more negative effect on confidence than initially expected. Our inflation forecast for 2015 is 0.2%, with the possibility of a mild deflation not excluded. During the first quarter of 2015 rising oil prices were the main contributors to the ascending inflation expectations, while during the second quarter upward surprises over expected inflation have come from manufactured goods and services. For 2016, we expect that inflation will increase up to 1.2%, still below the 2% ECB’s target.
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EFN Report Spring 2015: Economic Outlook for the Euro Area in 2015 and 2016

EFN Reports, No. 2, 2015
Abstract
Recent movements on world markets for commodities, currencies and capital stimulate the world economy, but they entail also considerable risks: income losses of energy exporting countries might trigger financial crises with worldwide repercussions; crises might also emerge from financial distress of emerging market debtors with liabilities denominated in US dollars. Extremely low interest rates might not only trigger stock and bond price booms, but also more volatility if investors become fearful of financial bubbles. Quite a few conditions are highly beneficial for a recovery of the euro area economy: governments and large corporations benefit from ultra-low bond yields, banks’ composite costs of debt financing have been converging during the past two years to very low levels, and borrowing costs for non-financial corporations have come down markedly. Prices for stocks, bonds and (on average) houses have gone up. Real disposable incomes of private households have risen due to oil prices. The real effective exchange rate is about 10% lower in March 2015 than it was a year ago, strengthening the price competitiveness of firms in the euro area. According to our forecasts, the euro area GDP will grow by 1.6% in 2015 and by 2.1% in 2016. Structural impediments, however, still limit the ability of the euro area economy to grow strongly: firms and, in particular, private households are only slowly reducing their heavy debt burdens, and confidence will not fully come back in France and Italy, as long as reform processes are inconclusive in both countries and as long as unemployment is not coming down markedly. Our inflation forecast for 2015 is 0.1%, with the possibility of a mild deflation not excluded. In 2016 inflation will increase up to 1.3%, still clearly below the 2% ECB’s target. This calls for continued monetary expansion, though its effects could be limited in the absence of a complementary fiscal stimulus, in particular in those countries where the implementation of structural reforms brings long term gains but short term losses.
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EFN Report Winter 2014/15: Economic Outlook for the Euro Area in 2015 and 2016

EFN Reports, No. 1, 2015
Abstract
At the beginning of the year 2015 crude oil is, with little more than 50 dollars per barrel (Brent), about 50% cheaper than in the summer 2014. The oil price hike is a stimulus for the whole world economy, even though the gains of energy users are matched by losses of the suppliers: oil producing countries frequently run high current account surpluses vis-à-vis the rest of the world. It is therefore plausible to assume that, reacting to the redistribution of incomes, the oil user countries will increase their spending by more than what will be lost in spending by producers. Investment activity in the euro area has recently been particularly weak. Remarkably, investment in Greece, Portugal, and Spain, i.e. in countries that had to accept international support during the euro crisis, has strengthened. The setback took place in the so-called core countries, including Germany. Consumption growth was also subdued. Lower oil prices, by increasing real incomes of consumers and lowering production costs for firms, should increase private consumption and, in particular, investment. Moreover, the depreciation of the euro will favour exports. Overall, according to our forecasts, the euro area GDP will grow by 1.3% in 2015 and by 1.6% in 2016. GDP growth is about 0.3 percentage points higher due to the impact of lower oil prices in 2015. However, these forecasts are subject to substantial uncertainty, and we do not see any significant reduction of the unemployment rate during the forecasting horizon. Our inflation forecast for 2015 is 0.3%, with the possibility of a mild deflation not excluded. In 2016 inflation will increase up to 1.1%, still clearly below the 2% ECB’s target. This calls for further monetary expansion, though its effects could be limited in the absence of a complementary fiscal stimulus. The expansionary cyclical policies should be combined with more structural reforms to enhance the competitiveness of the euro area and its growth potential, which in our forecasts remains quite limited. In fact, we expect potential output to grow by only 0.4% both in 2015 and 2016.
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Intergenerational Transmission of Unemployment - Evidence for German Sons

M. Mäder, Steffen Müller, Caroline Schwientek, Regina T. Riphahn
Jahrbücher für Nationalökonomie und Statistik, No. 4, 2015
Abstract
This paper studies the association between the unemployment experience of fathers and their sons. Based on German survey data that cover the last decades we find significant positive correlations. Using instrumental variables estimation and the Gottschalk (1996) method we investigate to what extent fathers' unemployment is causal for offsprings' employment outcomes. In agreement with most of the small international literature we do not find a positive causal effect for intergenerational unemployment transmission. This outcome is robust to alternative data structures and to tests at the intensive and extensive margin of unemployment.
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Arbeitsmarktbilanz Ostdeutschland: Beschäftigungsrückstand gegenüber dem Westen etwas geringer als bisher ausgewiesen

Hans-Ulrich Brautzsch
Wirtschaft im Wandel, No. 6, 2014
Abstract
Für die Bundesländer liegen noch keine amtlichen Angaben zur Zahl der Erwerbstätigen vor, die mit den im Rahmen der Generalrevision 2014 der Volkswirtschaftlichen Gesamtrechnungen neu berechneten Erwerbstätigenzahlen für Deutschland insgesamt kompatibel sind. Die Entwicklung der Erwerbstätigkeit kann deshalb nur auf der Grundlage der revidierten Beschäftigungsstatistik analysiert werden. Die Zahl der Beschäftigten wurde in Ostdeutschland stärker nach oben korrigiert als in den Alten Bundesländern. Damit dürfte die Revision der Erwerbstätigenzahl für Ostdeutschland höher ausfallen als für Westdeutschland. Dies hat auch Auswirkungen auf die Arbeitslosenquote, die nunmehr etwas geringer ausgewiesen werden dürfte als zuvor. Die günstige Beschäftigungsentwicklung in der ersten Hälfte des Jahres 2014 dürfte dazu führen, dass im Durchschnitt des Jahres 2014 die Zahl der Erwerbstätigen in Ostdeutschland etwas über dem Vorjahreswert liegen wird. Die registrierte Arbeitslosigkeit wird – wie in den Jahren zuvor – vom schrumpfenden Arbeitsangebot beeinflusst. Die Arbeitslosenquote dürfte in diesem Jahr 9,5% betragen, nach 10,1% im Vorjahr.
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Langzeitleistungsbezug und Langzeitarbeitslosigkeit – Bericht zum 11. IWH/IAB-Workshop zur Arbeitsmarktpolitik –

Birgit Schultz, L. Krüger
Wirtschaft im Wandel, No. 5, 2014
Abstract
Im Rahmen des IWH/IAB-Workshops zur Arbeitsmarktpolitik am 1. und 2. Oktober 2014 in Halle (Saale) trafen sich zum elften Mal Vertreter aus Wissenschaft, Politik, Verwaltung und Wirtschaft, um sich aus ökonomischer und soziologischer Sicht über neue Entwicklungen und Erkenntnisse zu den Themen langfristiger Sozialleistungsbezug und Langzeitarbeitslosigkeit auszutauschen. Der Fokus der Workshops, die als Bindeglied zwischen Theorie und Praxis konzipiert sind, lag dabei auf den Ursachen und Konsequenzen der Langzeitarbeitslosigkeit sowie auf möglichen Lösungsansätzen.
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EFN Report Autumn 2014: Economic Outlook for the Euro Area in 2014 and 2015

, 2014
Abstract
In autumn 2014, world production continues to be expanding at a moderate rate, a bit faster than at the beginning of the year. A strong upswing of the world economy is, however, not in sight: the US upswing continues but is not probable to gain more pace, and the Chinese economy has to cope with severe problems in the financial and the housing sector. Important conditions for a stronger recovery are in place: the fall in financing costs allows euro area governments to conduct fiscal policies that are, on average, clearly less restrictive than in the years before, and nonfinancial firms benefit from a shrinking burden of interest payments. Interest rates for bank credit in the southern economies are now slowly going down. However, the recovery will stay sluggish as long as firms and households lack confidence in the economic policy of important member states. In fact, economic confidence in the euro area declined somewhat during summer in part due to news on the conflict between Russia and the west, although only about 5% of all exports leaving the euro area go to Russia or Ukraine. Production growth in the euro area slowed down to stagnation in the second quarter, mainly due to a decline in Germany related to a weather effect. Demand in the rest of the euro area continued to slowly expand. In this context, we forecast that the euro area economy will expand by 1.3% in 2015, after 0.9% in 2014. For 2014 and 2015, we do not see any significant reduction of the unemployment rate, because employment dynamics will stay weak due to subdued growth and the still rising participation rate in the euro area. Our inflation forecast for 2014 is 0.5%. In 2015 inflation will also remain subdued, at about 1.1%.
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