Jobless Surge in Austria on Virus Shows Limits of State Wage Aid

(Bloomberg) --

The scale of the coronavirus impact on jobs is starting to become apparent in Europe, showing that even generous programs to protect workers might not stop unemployment surging.

Germany, Austria and Switzerland all received record applications for state wage support, typically known as “Kurzarbeit.” Yet Austria’s jobless rate skyrocketed in March to its highest since just after the Second World War.

Unemployment in the hospitality sector jumped an eye-watering 167% from a year earlier, as the pandemic forced hotels and restaurants to close their doors and the nation’s ski season was cut short. The construction sector saw a 104% increase.

The labor office said the jump happened mid-month, just as Austria introduced restrictions on public life.

Under Kurzarbeit, the government partially offsets the salaries of private sector staff when companies are forced to temporarily halt or reduce activities.

In Germany, almost half a million companies filed applications in March, suggesting that about a fifth of the workforce will have its hours reduced.

Automakers such as Volkswagen AG and Daimler AG, which are core to German industry and which were already struggling with the shift to electric vehicles, were among the biggest takers.

Unemployment was actually fairly stable in March, but that’s probably because the official statistics had a cutoff date less than halfway through the month. The government has since shut down swathes of the economy, and its advisers this week predicted the steepest recession since the global financial crisis in 2009.

In Switzerland, where the central bank expects the economy to contract this year, Kurzarbeit applications now cover 20% of the country’s wage earners. March unemployment data there will be published next week.

©2020 Bloomberg L.P.