German unemployment falls to 12 pc in March

30 March 2006

BERLIN – Despite a fall in German unemployment to 12 per cent in March, the long harsh winter in Europe’s biggest economy drove up the numbers out of work in seasonally-adjusted terms by a bigger-than-forecast 30,000, the Federal Labour Office said Thursday.

Analysts had expected a drop of about 6,000 in the March seasonally-adjusted jobless figure.

The release of the latest jobless data came against the backdrop of growing tensions in Chancellor Angela Merkel’s right-left grand coalition government over labour market reform.

Merkel’s Social Democrat coalition partners have been resisting calls from members of the Chancellor’s conservative political bloc for the government to introduce broader labour market reforms than are proposed in the coalition agreement between the two parties.

This includes a move to cut non-wage costs as well as plans to extend the probation period for young workers from six months to two years. A similar move has already sparked wide-spread unrest in France.

But the latest German unemployment data did help to ease some of the pressure on the Merkel government with the numbers out of work in the politically-important seasonally-unadjusted terms slipping by 72,000 to 4.976 million in March.

As a result, the unemployment rate edged down to 12 per cent compared to 12.2 per cent in February.

The March unadjusted figure was 290,000 less than the same month last year, when the labour market was still adjusting to tough new welfare and labour reforms introduced by former Chancellor Gerhard Schroeder.

While the unemployment rate in the nation’s hard-pressed former communist east dropped to 19.3 per cent in March from 19.5 in February, this was still about double the amount in the west, where unemployment slipped from 10.2 per cent to 10.1 per cent this month.

Speaking in parliament Labour Minister Franz Muentefering said the government was disappointed by the March data.

“Unemployment is still too high,” said Muentefering, adding that the country’s political leadership, business and society as a whole needed to make a bigger effort to create jobs.

Labour Office chief Frank-Juergen Weise said the normal pickup in the labour market during March when milder spring weather helped to underpin hiring had still not emerged.

“Economic impulses are not yet strong enough to create jobs including with full social security payments,” Weise said when releasing the data.

The release of the unemployment figures came in the wake of two economic sentiment reports this week showing business confidence soaring to a 15-year high and consumer confidence jumping to its highest level in more than four years.

But despite signs that economic growth in Germany was gaining momentum, analysts are not expecting a dramatic turnaround in jobs this year.

The most optimistic forecasts for German economic growth this year is expected to come in at about two per cent, which is likely to fall short of the expansion rate needed to give job creation a big boost.

“A significant rise in employment and an economically driven drop in unemployment have not become apparent,” said Matthias Rubisch, economist with Commerzbank AG.

Separate data also released Thursday by Germany’s statistical office showed employment in Germany slipping by 0.3 per cent in February compared to the same month last year.

However, in seasonally-adjusted terms, employment edged up by 5,000 in February compared to January, when an unusually large number of older workers took retirement.

DPA

Subject: German news