The German jobs machine is stalling. A disappointing set of earnings from Siemens yesterday underlines the scale of the challenge facing German industry. Even the more profitable digital business is under pressure, because it is too heavily weighted towards autos and machine tools (accounting for 20% and 15%, respectively, of sales).
Germany has suffered disproportionately from ‘trade wars and geopolitical turbulence’ because it has not adapted quickly enough and is under-represented in areas that have performed well this year – software, consumer digital services and specialist or niche semi-conductors. These are the areas where the US has excelled this year, and Germany lacks a critical presence in these markets.
Cost cutting will take its toll on the labour market. Vacancies extended their decline in July, down 24.7k m/m, the biggest fall since the euro crisis, when (job) openings dropped 32.8k m/m in December 2012. The y/y has turned sharply lower, falling to -2.9%. According to the OECD, over a quarter of jobs in the German business sector were sustained by foreign final demand.
