31 May 2006

BERLIN - German unemployment fell by a bigger-than-forecast 93,000 to 4.6 million in seasonally adjusted terms in May, the Federal Labour Agency said Wednesday as a pickup in Europe's biggest economy helped to create jobs.

Economists had forecast a drop in the numbers out of work of 20,000 in May, with seasonally-adjusted unemployment rate edging down to 11 per cent from 11.3 per cent in April with the labour office expecting the downward trend to continue in the coming months.

In the more politically sensitive seasonally-unadjusted or headline rate, the numbers out of work in dropped by 255,000 to 4.5 million last month.

This resulted in the headline jobless rate slipping from 11.5 per cent in April to 10.8 per cent in May. A year earlier the unemployment rate stood at 11.8 per cent.

The fall also helped to ease the pressure on Chancellor Angela Merkel left-right coalition government as it considers steps to reform the nation's labour market and welfare benefit system.

Seasonally-unadjusted unemployment surged to a post-Second World War record of about 5.3 million at the start of last year.

This followed the introduction of a round of tough changes to welfare payments launched by former Chancellor Gerhard Schroeder's Social Democrat-led government.

"The development at the job market in May was pleasing," said labour agency chief Frank-Juergen Weise in releasing the latest figures. "Unemployment sank surprisingly strongly as demand for workers rose again and job cuts continued to slow."

The data also showed the number of job vacancies rose by a seasonally adjusted 19,000 in May compared to 17,000 in April.

Employment rose 10,000 in April, the latest month for the figures, after falling a revised 13,000 in March.

The secretary general of Merkel's conservative Christian Democrats, Ronald Pofalla, seized on the fall in the numbers out of work as "reason for euphoria.

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