German jobless set to rise as economic downturn gains ground

Jan 7, 2009, 2:09 GMT

Berlin - German unemployment rose in December, analysts predict data to be released Wednesday will show, adding to signs of the tough year facing Europe's biggest economy.

The country's dole queues swelled by a seasonally adjusted 10,000 last month, analysts forecast, as a result cancelling out the fall in the numbers out of work in November. The unemployment rate, however, is expected to have remained at 7.5 per cent in December.

'At the moment the labour market is stagnating before the lay offs begin in January,' said DZ-Bank economist Philipp Jaeger.

Wednesday's jobless data to be released by the Nuremberg-based Labour Office will also help to set the stage for the publication later this week of another bleak round of German economic data.

This includes figures recording another drop in the nation's key exports in November on the back of a shrinking global economy and the recent rise in the euro.

At the same time, data is expected to show a 2-per-cent slump in industrial production and a 1.6-per-cent contraction in German factory orders as 2007 came to an end.

Combined with a sharp fall in inflation, the grim economic news emerging from Germany is also likely to add to the pressure on the European Central Bank to press on with its rate-cutting cycle this year.

German employment hit a record 40.3 million last year to reach the highest level since German unification in 1990 as solid economic growth and labour market reforms helped to boost hiring in recent years.

But a drop in German unemployment in December will also bring to an end a string of monthly falls in the numbers out of work in the nation with both economists and the country's labour office warning that joblessness in the country will rise in the coming months.

Indeed, the new German jobless data follows a series of announcements by companies about plans for layoffs and cutting production as they face up to what could be the biggest economic downturn since the end of the Second World War.

In the politically important seasonally unadjusted terms, German unemployment rose by between 70,000 and 110,000 in December to a total of between 3.06 million and 3.1 million, analysts expect Wednesday's data to show.

Chancellor Angela Merkel's ruling coalition are hoping to formally sign off next week on a second economic stimulus package worth to 50 billion euros (68.2 billion dollars) over the next two years and which is partly aimed at underpinning economic growth through a batch of infrastructure projects.