In 2008 while the lucrative holiday period drew near, luxury watch production had slowed, brought to heel by the global financial crisis. Since mid-2008, exports declined and unemployment rose, with notices of staff reductions being announced by large multinationals each month.

In Neuchatel where a large number of luxury brands are located, the manufacturer Ulysee Nardin had to fire 12% of its 25o man work force and produced at a slower rate.

But since September, according to the management, the ateliers are running at 100% with orders rising and the company has ended its practice of partial unemployment.

Ulysse Nardin has inaugurated a new boutique in Beijing and the Neuchatel-based luxury watch maker seems braced for renewed good times. The director of the company, Rolf Schnyder, recently stated recently that the company would end the year in the black, albeit with less profit than last year. 2008 had started off very well for the Ulysse Nardin but finished off badly. 2009 started off badly and has apparently finished well.

The Director’s prognostic is that the recession has ended and that growth has returned, with November sales 30% higher than those for November 2008.

Nonetheless, Mr. Schnyder believes that the United States will take much more time to recover, and their market is important for the luxury watch maker; that said, the importance of the US market has declined from 30% historically to currently 18%.

An unstated reason for the return to health is that the company is operating with a smaller workforce, which, for the moment, the company does not seem in a rush to rehire.

Additionally, with the rise in orders, their production capacities cannot keep up. The various subcontractors upon which the luxury brands depend – for watch casings, dials and other parts– let go substantial numbers of staff over the past year and do not have the resources to produce at the old capacity levels. They probably are also wary about too rapidly hiring back staff.

Also, despite the return of strong sales, the distribution of sales has nonetheless changed, with a marked decline in sales of super expensive pieces and a concomitant rise in sales of moderately priced pieces.

The phenomenon is identical in China and in the United States. Ulysse Nardin’s director believes that the worst is also passed in the United States and the economy is recovering, though it will be a longer road to elsewhere. Besides the US and China, Russia is also an important market for the luxury brands, as well as the middle east, though with the financial crisis in Dubai, sales have dropped by 70%. A large part of the luxury watch maker’s sales figures this year in Spain, Italy, Turkey or Florida has come from Russian tourists.

The prognostics for Switzerland in 2010 are not especially optimistic.

According to the Swiss unions, purchasing power will strongly decline in 2010 as prices rise, inflation begins, and salaries stagnate.

We might point, at this juncture, that the unions and syndicates of Switzerland were all willing advocates of the open markets in Switzerland and the integration with the European community, which is the principal causative factor of the decline in purchasing power and standard of living.

Currently the unions are predicting a decline in the gross national product of about 3%, with a further decline in 2010 of perhaps 1%. The unions’ predictions are more pessimistic than the government economist’s because they take into account precisely the decline in purchasing power which will have a strong effect on the Swiss economy for some time to come.

The decline in purchasing power of Swiss households is estimated to diminish by several billion francs in 2010 as a result of the massive rise in health insurance premiums, a rise in the CO2 tax, and austerity measures by the different cantons to brake the acceleration of public debt. Overall the forced savings represents about 1% of the GNP – about 5 billion francs. Converted into employment, this equals about 40,000 jobs !

The current recession is expected to follow a W pattern and the positive signs of improvement are expected to reveal themselves later on as just a simple renewal of stocks. The small perceived rise in production is not a sign of rise in demand as claimed by certain over-optimistic observers. And the rise in unemployment is expected to further damage demand down the road.

A variety of economists and commentators are expecting to see over 250,000 unemployed by 2010. This constitutes a historic record for Switzerland and of course the record unemployment will cause ancillary damage in psychological problems and other health and social problems.

Further, 2009 has seen the destruction of banking secrecy in Switzerland, leading to an important exodus of foreign funds under management in Switzerland. Subsequent to the agreement made with the United Sates, the Swiss federal government is now besieged with demands for similar cooperation from France, Germany, Turkey, and elsewhere.
No one has yet provided a credible estimate of the part of GNP made up by the Swiss financial services sector but private estimates such as by Banque Pictet in Geneva have estimated that the removal of Swiss banking secrecy will cost roughly 100,000 jobs in Switzerland.

The fortunes of the luxury watch making sector in Switzerland have continued to plummet with the number of workers joining the unemployed increasing 13.2% in one month.

The official rate of unemployment in Switzerland across all sectors is now 3.4% — although, as in all countries these official statistics are vigorously massaged and include only those currently receiving unemployment benefits.

At the end of March there were 135,000 unemployed enrolled at regional placement offices (ORPs), about 2500 more than in February, according to the federal government’s SECO. Compared to March 2008, the number of unemployed increased about 30%.

According to the statistics, unemployment affects foreigners more than Swiss with the respective rates 6.9% and 2.4%.

The number of long term unemployed – those who have been looking for more than a year– remains so far relatively stable: there were roughly 16,000 in March 2008 and there are roughly 16,000 now.

The SECO is planning for an unemployment rate of 3.8% for 2009 and 5.2% for 2010.

At the moment, the sectors hemorrhaging the most jobs are banking/finance and luxury industries. However other industries heavily export-oriented have also been affected, like machine tools. In the luxury watch industry, the number of jobs lost over the past few months has been striking.

Unemployment is also becoming a serious problem among youth, with the number of unemployed among 16-24 year olds rising to 4% from 2.9% last year.

Reductions in working hours – so called ‘partial unemployment’ – in which workers work fewer hours and are paid proportionally less, has continued to progress as well. For many months the banks have been letting go employees each month in drips of 10 or 20 at a time. The luxury watch sector is the most recent casualty of the global downturn, in terms of its impact on the local economy.

Sectors such as pharmaceuticals and agroalimentary industries are doing very well, despite the terrible economy, with Nestle recently announcing its intention to hire several hundred new employees over the next 12 months.