German unemployment falls amid economic optimism (Roundup)

By Andrew McCathie Feb 1, 2011, 14:38 GMT

Berlin - German unemployment fell to its lowest level in nearly two decades in January, official data released Tuesday showed - adding to optimism about the outlook for Europe's biggest economy.

The 13,000 drop in seasonally-adjusted unemployment came after the numbers out of work posted a surprise increase in December, following a bitterly cold winter weather that hit outside work such as in the construction industry and caused havoc in the transport sector.

The unemployment rate edged down from 7.5 per cent in December to 7.4 per cent this month - its lowest level since 1992.

'With strong economic fundamentals and the first impact from the demographic change, the unemployment rate could drop below 7 per cent in the course of this year,' said ING Bank economist Carsten Brzeski.

Analysts had predicted a drop of 10,000 in the January adjusted data, which points to labour market trends.

'The economic dynamic remains intact,' said Commerzbank economist Eckart Tuchfeld. 'We are not expecting a downturn during the first half of the year.'

After rebounding from recession last year to chalk up a 3.6-per-cent growth rate, the German Government expects the nation's economic expansion rate to slow to 2.3 per cent this year.

However, many economists believe the country will post a growth rate closer to 3 per cent in 2011.

The solid state of the labour market is likely to add to hopes that private consumption will make a key contribution to economic growth as job fears fade amid falling unemployment.

But the jobless figures also raise fresh concerns about labour shortages emerging as the economy charges into a new year.

The number of job vacancies slipped from 379, 808 in December to 374,671 this month, the labour office said. However, compared with a year ago job vacancies surged by 38.1 per cent in January.

Despite the fall in seasonally adjusted terms, the politically important unadjusted data showed the numbers out of work jumped by 331,000 to 3.347 million in January. But that was 270,000 less than in the same month last year.

The unadjusted jobless rate climbed from 7.2 per cent in December to 7.9 per cent in January.

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