German unemployment jumps as economic downturn gains ground (Roundup)

By Andrew McCathie Jan 7, 2009, 11:36 GMT

Berlin - German unemployment rose for the first time in nearly three years in December, data released Wednesday showed, adding to signs of the tough year ahead for the nation as shrinking global growth hits Europe's biggest economy.

Seasonally adjusted unemployment rose by a more-than-forecast 18,000 last month, the nation's Labour Office said, resulting in the jobless rate edging up to 7.6 per cent from 7.5 per cent in November.

Analysts had expected the numbers out of work to increase by 10,000 in December.

'The December figures show that the economic crisis has reached the labour market,' said Labour Office chief Frank-Juergen Weise releasing the data.

'This has also dampened our optimism for 2009,' he said. The number of German job vacancies fell from 539,384 in November to 503,128 in December, the Labour Office said.

It was the first rise in German unemployment since February 2006 with a solid economic growth rate and a series of labour market reforms helping to boost hiring in recent years.

'The positive effect of the economic upswing has come to an end,' said ING economist Carsten Brzeski.

But he went on to say: 'The German labour market seems to be better prepared to weather stormy conditions than during earlier recessions.'

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.

Wednesday's jobless data also helps 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 drop in industrial production and a 1.6-per-cent contraction in German factory orders as 2007 came to an end.

Germany slumped into a recession during the third quarter last year with the Berlin-based German Economic Institute for Economic Research saying Wednesday it expects the nation's economy to contract by 1 per cent this year.

Other forecasters, however, have painted even gloomier economic scenarios for the German economy in 2009 as global economic growth goes into reverse.

Leading German companies have already announced 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 114,000 in December to a total of 3.102 million, the labour office said.

This pushed the unadjusted unemployment rate up from 7.1 per cent in November to 7.4 per cent last month. The jobless rate stood at 8.1 per cent in December 2007.

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.