German unemployment marks a sharp drop in September

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The number of unemployed in Germany fell twice as fast as expected in September, and the unadjusted rate dropped to 7.2 percent, official data showed on Thursday.

The result underpinned hopes for sustained domestic demand in Europe's biggest economy, which is leading the rest of the continent as it pursues an uncertain economic recovery.

The number of people seeking work fell by a seasonally-adjusted 40,000 to 3.031 million people, the federal labour office said. Economists polled by Dow Jones Newswires had forecast a more modest decline of 20,000.

German unemployment stood at an unadjusted 7.6 percent in August and the level in September marked the 15th consecutive monthly decline.

On Tuesday, Chancellor Angela Merkel forecast the number of unemployed would possibly fall below three million by the end of the year.

"We may get to three million or perhaps slightly below," Merkel said after the economic research group GfK said the country's consumer climate was at a three year high, largely as a result of improvements in the labour market.

The labour office said the strong decline was the result of "the economic recovery and a typical surge in the fall" when young graduates often begin working.

During the global economic downturn, the German government subsidised shorter working hours to help companies pull through, but most have now put staff back on full-time hours.

Earlier on Thursday meanwhile, the IG Metall trade union said it has accepted a 3.6 percent wage increase for around 100,000 workers in the steel sector, a deal that is to run until October 31, 2011.

The union had initially demanded a pay increase of 6.0 percent.

© 2010 AFP

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