German unemployment falls more than expected

1st August 2006, Comments 0 comments

1 August 2006, BERLIN - German unemployment fell by a larger-than-forecast 84,000 in July, the nation's labour office said Tuesday, as the pickup in Europe's biggest economy helped to underpin hiring. The drop in the market-sensitive seasonally adjusted unemployment data brought the jobless rate down to 10.6 per cent last month from 10.8 per cent in June with the numbers out of work dropping to 4.44 million. Analysts had predicted unemployment would edge down by about 30,000 with the unexpectedly large dro

1 August 2006

BERLIN - German unemployment fell by a larger-than-forecast 84,000 in July, the nation's labour office said Tuesday, as the pickup in Europe's biggest economy helped to underpin hiring.

The drop in the market-sensitive seasonally adjusted unemployment data brought the jobless rate down to 10.6 per cent last month from 10.8 per cent in June with the numbers out of work dropping to 4.44 million.

Analysts had predicted unemployment would edge down by about 30,000 with the unexpectedly large drop in the numbers out of work helping to shorten the odds for the European Central Bank to deliver another 25 base-points rise when it meets Thursday.

The German jobless data followed the release of figures last week also showing a drop in unemployment in two of the 12-member eurozone's other key economies - France and Spain.

The fourth consecutive monthly fall in unemployment is also likely to represent a boost to the political fortunes of Chancellor Angela Merkel's grand coalition, which has come under fire from business and economists for stepping back from rigorous economic and labour market reform.

German Labour Minister Franz Muentefering seized on the data as raising hopes for the German labour market.

But he warned: "There is nothing in the labour market in July 2006 that warrants a celebration but there is reason to be pleased."

Releasing the data, labour office head Frank-Juergen Weise said: "The current labour market figures confirm that the economic upswing has reached the labour market."

"Jobs paying full social welfare contributions are increasing and the number of vacancies has risen further," he said.

The decline in July followed an average monthly fall over the last four months of 65,000 with the football World Cup, which ended last month, helping to boost jobs in Germany.

The Nuremberg-based labour office had previously said that it had expected an additional 50,000 jobs to be created as a result of the month-long championships, which Germany hosted.

But Matthias Rubisch, economist with Commerzbank, said the fall in unemployment also reflected the round of labour market reforms introduced by the former Social Democrat-led government and the drive to create a low-wage sector.

The jobless data coincided with figures published by the Federal Statistics Office, which showed employment creeping up 0.1 per cent in June to chalk up its fifth monthly rise.

However, analysts are predicting that the government's planned three percentage-point hike in consumption tax in January will hit consumer spending in the nation and as a consequence dampen the nation's economic growth rate, which is this year expected to come in at up to about two per cent.

The number of people out of work in Germany based on the more politically important seasonally unadjusted terms declined by 12,000 last month to 4.38 million, bringing the unemployment rate down to 10.5 per cent.

This was 450,000 fewer than in July 2005. A year ago, seasonally unadjusted unemployment stood at 11.7 per cent.

While unemployment in the nation's economically key western half came in at a seasonally unadjusted 8.9 per cent, in the east it stood at 16.7 per cent.

Last month's fall in unemployment came despite the normally tighter labour-market conditions that prevail during the July holiday month.

DPA

Subject: German news

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