Electrolux plant closure highlights job fears

Up to 120 jobs will be lost when the Electrolux Schwanden plant closes at the end of next year zVg

A decision by Swedish electronic goods manufacturer Electrolux to close a Swiss factory, with the loss of up to 120 jobs, has heightened fears that a global economic slowdown may result in rising unemployment in Switzerland.

Electrolux blamed first and foremost worsening market conditions in Europe, along with regulatory developments in Switzerland, for shutting down the plant in Schwanden, canton Glarus, by the end of 2015. The troubled Swedish concern also closed a factory in the United States last year as it seeks to save costs.

The fortunes of Electrolux were not helped by recent changes to the Swiss law that require at least 60% of a product to be “Made in Switzerland” for it to bear that prestigious label.

“The production at Schwanden can no longer fulfil these high hurdles,” the company said in a statement.

However, another Electrolux factory in Sursee, canton Lucerne, will remain in operation partly because it can meet the requirements as it manufactures different products for the industrial market.

Last month luxury Swiss watch maker LVMH said it would cut 46 management positions at its TAG Heuer brand and put 49 employees on shortened working hours. Also, Cartier said it would put 230 workers on shortened time at a Swiss factory.

The watch industry, which had experienced a boom in demand from Asia in recent years, has seen a slowing in momentum, particularly in China. Media reports suggest this is tied to a Chinese crackdown on corruption resulting in fewer luxury gifts being handed out. Recent unrest in Hong Kong has also sharpened the watch makers’ feeling of unease in the region.

Euphoria denied

The Electrolux plant closure and cutbacks in the watch industry are concrete examples of a growing fear that worsening economic conditions may hit jobs in Switzerland. Earlier this month, the State Secretariat for Economic Development (SECO) downgraded its economic growth forecasts from 2% to 1.8%.

In addition, it raised its predictions for unemployment from 3.1% to 3.2% this year and to 3.1% in 2015, from an earlier forecast of 2.8%. The continued eurozone economic malaise and a slowdown in the growth of emerging economies was blamed.

That hardly represents a crisis in the Swiss job market, but does point to a sharp reversal in the type of optimism being displayed earlier in the year. In May, the KOF Swiss Economic Institute at Zurich’s Federal Institute of Technology reported the best job prospects since mid-2011 in its Employment Indicator, which measure sentiment among Swiss companies.

“It appears that the labour market is in for a good year,” KOF trumpeted in its press release.

George Sheldon, an economics professor specialising in employment trends at the University of Basel, believes that the tide is taking a turn for the worse. According to his calculations, every six or seven jobs out of 1,000 is currently at risk in Switzerland compared to 0.05-0.06% of jobs in mid-2011.

“For months and months indicators pointed to stable or even falling unemployment rates, but the trend has now shifted,” he told swissinfo.ch. “Unemployment might not rise by much in the short-term, maybe to 3.3% by the end of the year, but we do not know how far or how long this trend will go.”

“Switzerland is strongly export-oriented. Every second franc is earned overseas so it is not difficult to see that is where the problem is coming from, particularly the euro area.”

Immigration vote

Trade unions are also concerned about a forthcoming national vote on restricting immigration even further from a February initiative that has forced the government to find ways to restrict the tide of foreign workers.

The UNIA trade union has warned that a “yes” vote to the Ecopop initiative on November 30 would further strain Switzerland’s already awkward relations with the European Union over immigration.

“An acceptance of the initiative would lead to economic uncertainty and the loss of jobs,” the union warns.

However, Swiss Economics Minister Johann Schneider-Ammann told the Sonntagszeitung newspaper that the situation, whilst deteriorating, was far from drastic.

“We should not be over-dramatic,” he said. “Switzerland has survived the crises of the last few years exceptionally well. We remain robust and we are not looking at a recession.”