German unemployment falls sharply 03/01/2008 00:00

Germany's unemployment stood at a 15-year-low in December, data released shows, but with the pace of hiring expected to slacken during the coming months as Europe's biggest economy starts to slow down.

3rd January 2008

The Nuremberg-based labour agency said the numbers out of work in Germany fell last month by a seasonally adjusted 78,000 to 3.513 million with the jobless rate edging down to 8.4 per cent from 8.6 per cent a month earlier.

This was more than double the 35,000-drop in seasonally adjusted terms predicted by analysts, who see the adjusted data as indicating the underlying labour market trend.

"The good economic and employment growth rate allowed unemployment in 2007 to fall significantly," labour agency chief Frank-Juergen Weise said releasing the latest data.

He went on to say that he expected companies to continue to hire this year although at a slower pace with his comments echoed by economists.

"We expect the reduction in unemployment and the expansion of employment to continue in the coming months, but for the rate of increase to flatten out," said Eckart Tuchfeld, economist with Commerzbank AG.

Thursday's data showed employment climbing to a record high of 40.37 million in November, which represented 624,000 more than in the same month in 2006.

The number of job vacancies, however, fell by 7.8 per cent to 545,563 in December.

The release of the latest unemployment figures came against the backdrop of economists revising down their German economic growth forecasts for the coming 12 months as signs of a slowdown in the global economy have emerged.

In particular, this follows concerns about the economic fallout and the global credit crunch unleashed by the US housing market crisis as well as the jump in oil prices, which hit a record of 100 dollars a barrel on Wednesday.

However, both economists and major business sectors remain cautiously optimistic about the outlook for jobs with Germany remaining firmly on an economic growth path as it enters the new year.

"On balance, we believe that we are going through a mid-cycle dip; but not heading for a recession," said Elga Bartsch, economist with the investment house Morgan Stanley.

"On the whole, the German corporate sector should weather a potential credit crunch better than its European peers," she said.

Based on the politically more important seasonally unadjusted data, December joblessness in Germany came in at a 15-year low after it rose less than forecast, increasing by 28,000 to 3.406 million. The unadjusted jobless rate stood at 8.1 per cent last month.

The December jobless number was 602,000 less than in the same month 2006 with unemployment tending to edge up during the colder winter months as employers wind back outside work. Analysts had projected a 70,000-rise last month in seasonally unadjusted unemployment.

Unemployment stood at 9.6 per cent in December 2006.

While seasonally unadjusted joblessness in western Germany came in at an unchanged 6.7 per cent last month, the unemployment rate in the nation's more economically hard-pressed east slipped to 13.4 per cent from 13.7 per cent in November.

DPA