The year is two days old so far, but the range of economic news is already so broad and confusingly diverse that in other times it would easily have been enough for twelve or even 24 months. Record reports on the German labor market here, gloomy forecasts from the International Monetary Fund (IMF) there – if there is a common denominator that the reports and statements can be brought to, then it is probably: Rarely has the economic situation been so unstable, have the prospects been as uncertain as this January.
The Federal Statistical Office, which published the labor market statistics for 2022 on Monday, provided the most positive news of the year so young. According to this, an average of 45.6 million people were employed in Germany over the past twelve months – more than ever before. This is all the more astonishing given that 2022 was overshadowed by major economic problems, from the pandemic to the energy crisis and record inflation rates. However, thanks to state aid and a far-sighted personnel policy at many companies, the feared slump in the labor market was completely averted.
Even more: the number of employees even increased by almost 590,000 or 1.3 percent and thus exceeded the previous high of 2019 by a good 290,000 people. Most of the extra work was done by new immigrants, but at the same time the labor force participation of the domestic population continued to rise. Both growth impulses together outweighed the dampening effect that the aging of society is having on the labor market and which, without even higher numbers of immigrants, will lead to a significant decline in the population of working age in the medium term.
People found new jobs primarily in service occupations, which were responsible for 93 percent of the growth. Here, employment rose well above average by 1.6 percent. On the other hand, the number of self-employed people and their family workers declined again: it fell by 1.4 percent to just 3.9 million people.
One of the biggest risk factors for the economy is the corona wave in China
If you believe the Institute for the World Economy in Kiel, then employment is likely to increase again in 2023 before falling again for the first time in 2024. “Companies’ demand for labor is primarily being dampened by the economic consequences of the energy crisis, but the sharp increase in the minimum wage to twelve euros is also likely to have negative employment effects,” it said.
Another risk factor is the development of the global economy, which the head of the IMF, Kristalina Georgieva, painted in rather gloomy colors in an interview with the US television station CBS. The international community is “facing a tough year – tougher than the year we just left behind,” she said. The IMF assumes that a third of the global economy will slide into recession over the course of the year. “Why? Because the three big economies – USA, EU, China – are all weakening at the same time,” said the head of the IMF.
Georgieva was particularly skeptical when looking at Europe. While the US could possibly avoid a significant decline in economic output, “the war in Ukraine hit the European Union hard,” she says. Half of the EU countries will have to prepare for a recession in 2023. China is also facing a “tough year”, and things are looking even worse in a number of emerging and developing countries.
Other economists are also concerned about the situation in China. After moving away from the zero-Covid policy, the country is currently being overwhelmed by a massive corona wave, many people are sick, and businesses are closed. This should again have consequences for the global supply chains, which only stabilized a little in the last half of the year after the corona shocks of 2020 to 2022.