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Friday, 22 February 2013

Dutch Central Bureau of Statistics shows upsetting data on unemployment for January, 2013. It seems like my prediction from December 2011 is starting to become true after all.

In December 2011, I made a bold prediction on the Dutch unemployment situation in my article ‘The 2012 Outlook for The Netherlands:

I’m very clear about unemployment. In 2012, I suspect it to rise by at least 3%-4% in The Netherlands […].

 Many companies, like the one that I work for, wrote red figures over the last three years since 2008. And although some companies still managed to make a decent profit during this period, I don’t expect the Dutch companies to maintain their excess personnel when the current recession proves to be a nasty one. The period of mass lay-offs that I noticed during this year has only just started, is my conviction.

The predictions in this snippet have mostly been correct:

  • The cabinets Rutte I and II continued with their policy of senseless austerity measures, tax increases and increased prices for all kinds of government services. They did so, in order to reach their ‘pot o’gold at the end of the rainbow’: the 3% budget deficit threshold from the EU Stabilization and Growth Pact (SGP).
    • However, just like with this pot o’gold: when you think you can grasp it, it vanishes. So did the 3% budget deficit in The Netherlands;
    • The Dutch citizens simply stopped spending, thus causing the economic crisis to deepen further. This turned the 3% budget deficit for The Netherlands into a mirage;
  • The recession, although it had been officially over during a number of months in 2012, returned with a vengeance in 2012Q4: the so-called triple dip;
    • This made sense, as I called these multiple recessions for what they really are: a depression;
  • Many companies which were active in building and construction, the retail industry, the financial industry and the ICT industry and who had already written red figures since January 2009, continued to write red figures in 2012;
  • The consequence has been that these companies slowly, but surely burnt their reserves;
    • This deteriorated their solvability and liquidity and brought their credit lines in jeopardy;
  • These negative developments forced many of these companies to lay off personnel in large numbers, in order to cut their expenses and improve their viability. This caused a nearly continuous stream of mass lay-offs in 2012 and in the early months of 2013;
  • Many other companies simply defaulted, causing more much people to become unemployed;
Although the sentence about mass lay-offs in the aforementioned snippet indeed proved to be true, it seemed initially that I had been much too pessimistic on the Dutch unemployment situation.

Instead of  the 3% - 4% increase that I predicted, the unemployment rose by ‘only’ 1.5%: still a lot, but not a landslide change. So, in December 2012, I admitted that I had been too pessimistic.

Or wasn’t I?!

Today, the Dutch Central Bureau of Statistics (CBS) presented upsetting data on the Dutch unemployment situation in January. This month showed an increase in unemployment of 0.3%, when seasonally adjusted. The unadjusted, month-on-month increase has even been 0.8%(!).

Here are the most important snips from the CBS press release:

According to the latest figures released by Statistics Netherlands, unemployment adjusted for seasonal variation increased by 21,000 in January to 592,000.

Figures published by the Institute for Implementation of Employees’ Insurances (UWV) show that the number of unemployment (WW) benefits has risen by 29,000 to 369,000.

In January, 7.5% in the Dutch labour force were unemployed, versus 7.2% in December. Unemployment has risen dramatically in recent months. The average monthly increase over the past three months was 19,000 (11,000 men and 8,000 women).

Unemployment increased across all age groups. Youth unemployment climbed to 15% in January, as against more than 13% three months ago. Unemployment among 25 to 45-year-olds and 45 to 65-year-olds increased further in January to 6.7% and 6.4% respectively.

The number of current WW benefits grew by 8.6% in January 2013. The increase was above average in the northern provinces of Drenthe, Groningen, Friesland and Overijssel. The number of young benefit recipients and benefits paid to people employed in the construction sector also grew above average relative to December 2012.

In January, 74,000 new WW benefits were granted and 45,000 were terminated; 21,000 benefits were terminated due to resumption of work, i.e. 47% of the total amount of unemployment benefits terminated in January. The corresponding figure for January 2012 was 51%.

I made a chart of the unadjusted unemployment rates during the last five years. Although a strong increase in January is not per se unusual, the steep increase since September, 2012 is. And in my humble opinion, the unemployment will continue to soar for the coming 6 – 12 months, turning my 2011 prediction into reality soon.

Dutch unemployment rate 2008-2013
Chart by: Ernst's Economy for You
Data courtesy of :
Click to enlarge
And there is one more thing. These unemployment rates are not inclusive the unemployment data for Dutch freelancers (in Dutch: ZZP workers aka independents without personnel).

Freelancers, who don’t have an assignment for a shorter or longer term, are officially not unemployed, although they are without a job. Besides that, they are not entitled to any kind of unemployment benefit, as they work at their own risk. Therefore, their number is not included in the official unemployment data.

Nevertheless, most freelancers (on a total of about 750,000) work in the financial industry, the ICT industry and in Building and Construction. Not by coincidence, these are all industries that have been hit extremely hard by the enduring credit crisis.

In the past, many of these freelancers have been actively pushed by their former employers to become ZZP-worker, with the promise of a contract for a number of months or years.

However, when these contracts eventually ended, many freelancers had a very hard time to find a new assignment, as they had to compete with inexpensive East-European constructors and Indian knowledge workers. Many of them will not have found a new assignment at all, I reckon.

Consequently, the freelancers could be a large source of hidden unemployment in The Netherlands. Here is a snippet of the 2011 article behind the link:

Only the best professionals with skills that are unequalled by others and that might even make them unique, can maintain virtually writing their own checks. You could call this the Champions League of the freelance workforce.

All others are earning less and sometimes much less. This is a strong deflationary force.

And when freelancers don’t get an assignment for a longer period of time, their problems are mounting:
  • They have no right to Unemployment Benefit, as they are not unemployed.
  • They don’t count in the official unemployment statistics for the same
    reason and therefore often remain under the radar.
  • They cannot maintain building up pension rights, as they can’t afford this with no source of income.
  • They have a right to a certain form of public welfare, but must first consume their savings before entering the Public Welfare-office.
  • Their costs remain often high: expensive income and labor-inability insurances, expensive leased cars, high tax-bills for VAT (Value Added Tax) and Income taxes.
Although I can’t prove it, unfortunately, I would expect the Dutch unemployment rate to be 2%-3% higher when the unemployed freelancers would be included.

This would put an ugly stain on the still-favourable Dutch unemployment rates. 

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