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Falling unemployment fails to comfort consumers

Unemployment has shown a clear downward trend over the past six months

(Keystone)

The unemployment rate in Switzerland has fallen for the sixth month in a row, from 3.7 per cent in June to 3.6 per cent last month.

But the steady decline is failing to reassure consumers who say they are reluctant to spend for fear of losing their jobs.

Figures from the State Secretariat for Economic Affairs (Seco) on Friday showed that the number of jobless had fallen by 978 people to 143,125.

The number of people looking for work also declined to 210,740 – 1,848 less than at the end of June. The number of job vacancies stood at 8,577 (-991).

The unemployment rate is now at the same level as in August last year.

Commenting on the jobless figures, analyst Astrid Frey at Bank Sarasin said there were no surprises.

“It was anticipated that the job market is recovering but at a slow pace… consumers are still scared to lose their jobs and that was reflected in [Thursday’s] consumer confidence data,” she said.

Consumer sentiment

The Swiss consumer sentiment index, which is published quarterly, improved to –12 points in July from –13 in April.

But the index, compiled from a survey of more than 1,100 households, did not show much enthusiasm for the economic recovery underway in the country.

Although the assessment of the general economic environment over the past 12 months improved once again, households were not so upbeat about their financial situation, Seco said in its statement.

It added that households expected only a slight improvement in their future financial position.

The index indicated that families were wary of buying expensive goods such as cars, furniture and electrical appliances at the moment.

Economist Thomas Traut at Credit Suisse First Boston investment bank said the index number was “slightly disappointing” because a more significant improvement had been expected.

“The assessment of the general economic environment in the past 12 months improved, but what is still bad is households’ assessment of their financial situation. Households are relatively pessimistic,” he said.

Analysts had on average been expecting an improvement of the index to –8 points.

Not surprising

In another assessment of the index, Seco economist Bruno Parnisari said that the results were not surprising, explaining that economic growth had not yet filtered down to salaries.

“It is a positive sign that the economic improvement is being noticed by households but there has been no progress on the salaries’ front. That’s why consumers do not immediately see an improvement in their wallets,” he said.

Parnisari commented that the situation was nothing out of the ordinary. It was normal that the consumer climate would only improve at a later stage, he said.

The consumer climate index, which has been on the rise for the past four quarters, is following the trend observed in Germany and Italy.

Interest rate rise?

On a general economic note, Switzerland’s leading economic indicator rose to its highest level in more than three and a half years in July, adding fuel to expectations of further interest rate rises as the economic recovery gains pace.

As a barometer, the indicator points to the expected performance of the economy six to nine months ahead.

The closely watched indicator, compiled by the KOF Institute for Business Cycle Research in Zurich, reached 1.10 in July, beating forecasts of 1.05.

The indicator signals that the GDP (Gross Domestic Product) growth rate will also rise further in the second half compared with the previous year.

In their April forecast, economists at KOF, which is part of the Federal Institute of Technology in Zurich, predicted a figure of 1.4 per cent growth in the economy this year.

swissinfo with agencies

Key facts

Total number of unemployed: 143,125, representing 3.6 per cent of the working population.
Unemployment is down for the sixth month in a row.
The highest numbers of unemployed people are registered in canton Zurich: 30,510.
Canton Geneva has the highest unemployment rate (7 per cent), followed by canton Vaud (5.2 per cent) and canton Jura (4.6 per cent).
Canton Uri has the lowest rate of jobless: 0.9 per cent.
The number of jobless young people went up in July by 1,710 to 25,528 or 4.6 per cent of the total unemployed.

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