Annual Review 2020

Labour Market under Heavy Pressure due to Corona Crisis

05 Jan 2021 | Press release no.2

“The collapse of the labour market in spring is still having an impact. The consequences of the Corona pandemic and the measures taken to contain it continue to be very evident. However, the stabilising effect of short-time work has secured employment and prevented higher unemployment,” said the Chairman of the Federal Employment Agency (BA), Detlef Scheele, today at the monthly press conference in Nuremberg.

Annual Average Unemployment Rate for 2020:

Change Compared to 2019:

Annual Average Unemployment Rate Compared to Previous Year: 
+0.9 percentage points to 5.9 percent

Unemployment and underemployment increased due to Corona

At the beginning of 2020, the weaker economy already counteracted a further positive development in unemployment, which had characterised the previous years. As of March 2020, unemployment and underemployment have increased as a result of the Corona pandemic measures. Following the easing of measures, the labour market recovered in the further course of the year, but the average number of unemployed in Germany in 2020 still increased by 429,000 to 2,695,000 people compared to the previous year.

Underemployment, which counts e.g. persons in labour market policy measures and in short-term incapacity to work, also increased, although not to the same extent. This is mainly due to the fact that participation in labour market policy measures was only possible to a limited extent due to the lockdown and that, for example, reports of incapacity to work could not be recorded to the usual extent due to the changed work processes in the agencies and job centres. Underemployment averaged 3,519,000 for the year, 319,000 more than in 2019.

Never before have so many people been on short-time work

With the start of the lockdown in March, short-time work rose to a historic level within a very short time. The previous peak was reached in April with almost 6 million people in short-time work, which corresponds to 18 percent of all employees subject to social insurance contributions. In the financial and economic crisis of 2008/09, the peak was 1.4 million. Unlike back then, in spring 2020 not only predominantly manufacturing companies, but also to a large extent service companies, e.g. the hotel and restaurant industry, claimed cyclical short-time work. At the peak, 63 percent of employees in the hospitality sector and 27 percent in the manufacturing sector received cyclical short-time allowances. In the course of the year, parallel to the relaxations in the summer, the trend went back to production operations.

With an average work loss of about 38 percent, the use of short-time work has arithmetically secured jobs for about one million employees and prevented their (temporary) unemployment.

Labour demand has also suffered from the lockdown

Nevertheless, redundancies could not be avoided. Both employment subject to social security contributions and marginal employment were affected by the measures to contain the Corona pandemic, each with a decline of about half a million employees at the peak. However, with the relaxations in summer and autumn, the situation visibly eased.

The number of registered jobs also fell sharply in April. A slight recovery set in during the summer, which flattened out towards the end of the year.

The Federal Employment Agency is responding flexibly to the challenges

The pandemic also had an impact on the BA’s work. With the lockdown in March, applications for short-time work reached historic levels within a few weeks. Instead of the usual 700, up to 11,500 employees processed applications for short-time allowance at peak times.

Since face-to-face meetings were not possible, the BA shifted its advisory services to the telephone and the internet. Instead of 4,000, up to 18,000 employees now provided telephone advisory.

The BA has also expanded its online offering within a short period of time. With the expanded eService, video calls, or an app for short-time work, many concerns can now be dealt with from home.