Germany is in recession!!!

Back in August and September 2022, the German unemployment rate was only 5.5%. Then Germany plunged into recession. Here’s Bloomberg:

Germany suffered its first recession since the start of pandemic, extinguishing hopes that Europe’s top economy could escape such a fate after the war in Ukraine sent energy prices soaring.

First-quarter output shrank 0.3% from the previous three months following a 0.5% drop between October and December, the statistics office said Thursday. Its initial estimate, last month, was for stagnation.

As a result of this “recession”, the German unemployment rate has soared to 5.6%.

Perhaps this data sheds a bit of light on the point I was making in my previous post.

PS. If you prefer the other German unemployment measure (the harmonized unemployment rate), it’s fallen from 3.1% to 2.8% during the “recession”.



8 Responses to “Germany is in recession!!!”

  1. Gravatar of Ricardo Ricardo
    26. May 2023 at 04:29

    The harmonized unemployment rate excludes those who have given up looking for work, which means it’s pretty useless. the actual unemployment rate is significantly higher, and not only higher than 2.8% but probably higher than the 5.6% figure.

    Not to mention, the government has been spending massively in Germany over the last three years. Germany might weather the storm more than most because it has a robust manufacturing industry, something the U.S. no longer has, but they will also have a turbulent ride as Banks curtail lending.

    You said economists as a group have failed to predict any economic recession, but this is simply incorrect. The Austrian economists predicted both 1929 and 2007/8.

    I mean it should be obvious that every time the Fed reduces rates below the natural rate it creates a bubble. And once banks exhaust their “bank term funding program” lifeline, you’ll see more regional failures, and I suspect that will be over the summer or in the early fall.

    So not only do we get the wild swings from QE to austerity, but we also get more centralization due the Fed’s unnecessary market intervention; it’s not a good system.

    But at this rate it doesn’t matter what delusion economists subscribe to next, because people can take matters into their own hands via crypto adoption, which is probably a smarter choice moving forward since it will not only preserve wealth as the fiscal situation gets out of control, but it will force governments into their limited state, and totally destroy the Fed (and all central banking), which was the framers intended purpose. cryptos pegged to commodities, like Paxos Gold, look pretty good.

  2. Gravatar of foosion foosion
    26. May 2023 at 07:11

    The harmonized unemployment rate is pretty much the same as the US definition.

    According to the OECD: “Harmonised unemployment rates define the unemployed as people of working age who are without work, are available for work, and have taken specific steps to find work.”

    US BLS:
    “They were not employed during the survey reference week.
    They were available for work during the survey reference week, except for temporary illness.
    They made at least one specific, active effort to find a job during the 4-week period ending with the survey reference week (see active job search methods) OR they were temporarily laid off and expecting to be recalled to their job.”

  3. Gravatar of ssumner ssumner
    26. May 2023 at 08:17

    Thanks foosion.

  4. Gravatar of Matthias Matthias
    29. May 2023 at 16:21

    Ricardo, the ‘Internet-Austrian’ theory of the business cycle requires entrepreneurs to be idiots, who can’t see the signs that are obvious to keyboard warriors, to work.

  5. Gravatar of Doug M Doug M
    30. May 2023 at 21:10

    It looks like a problem with definitions.

    A recession is a drop in output, not a drop in employment. The cuts in employment frequently lag the onset of the recession.

  6. Gravatar of Matthias Matthias
    31. May 2023 at 00:43

    Doug, the main thing normal people care about is whether they or their friends and family are losing their jobs.

    Whether you call that a recession or use some other definition doesn’t matter too much.

    Foosion, yes, the native German definition of unemployed counts more people as unemployed than the definitions most other countries use.

  7. Gravatar of ssumner ssumner
    4. June 2023 at 07:54

    Doug, The definition of a recession involves both output and employment. And there isn’t much of a lag, indeed unemployment often starts rising before a recession—as in 2001 and 2007.

  8. Gravatar of ssumner ssumner
    4. June 2023 at 07:54

    I should clarify I am talking about the US. For Germany, Doug may well be correct.

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