LEAD: German unemployment falls to 20-year low despite debt worries

By Andrew McCathie Nov 30, 2011, 11:12 GMT

Berlin - German unemployment fell to its lowest level in 20 years in November as companies in Europe's biggest economy stepped up hiring despite Europe's festering debt crisis, data released by the Federal Labour Office on Wednesday showed.

The more-than-forecast 20,000-drop in seasonally adjusted unemployment to 2.913 million came after a 10,000 rise in job queues in October. Last month's rise brought to an end 27 consecutive months of a decline in the numbers out of work.

'The German labour market continues to profit from what has been up until now a good economic development,' said Labour Office board member Heinrich Alt.

'There were no clouds on the horizon in November,' he said adding that demand for labour continues to rise.

The November fall pushed the jobless rate down to 6.9 per cent last month from 7 per cent in October. Analysts say unemployment in Europe's biggest economy now stands at its lowest level since November 1991.

Economists had predicted a drop of 5,000 in the November adjusted data, which points to labour market trends.

'The renewed monthly decline in adjusted unemployment after last month's surprising rise adds to our view that the impressive labour market upswing is not over yet,' said Alexander Koch, economist with the Italian bank UniCredit.

While the number of job vacancies dropped to 491,656 in November compared with 499,521 in October, the November figure was 24.7-per-cent higher than the same month in 2010.

In addition to a long period of wage stagnation in Germany, the nation's labour market has also been buoyed by a tough round of economic reforms over the last half a dozen years and demographic factors.

This means Germany does not suffer from the same youth unemployment problems as other parts of Europe.

But unemployment is a lagging economic indicator and economists also believe that slowing economic growth in Germany as a result of the debt crisis gripping the 17-member eurozone will undercut the jobs market.

In the more politically important unadjusted terms, the labour office said the numbers out of work dropped by 24,000 to 2.713 million.

The unadjusted jobless rate slipped to 6.4 per cent in November from 6.5 per cent in October. A year ago, the unemployment rate stood at 6.9 per cent.

The fall might also partly reflect what has been an unusually mild start to the German winter, analysts said.

But Alt warned that the numbers out of work should rise in the coming months to breach the 3-million mark amid the traditional winter slowdown in the nation's labour market as outside jobs notably in the building trade decline.

In the meantime, the positive news emerging from the labour market continues to underpin consumer spending in the country at a time when exports are threatened by slowing global trade.

In a separate statement Wednesday, the German statistics office retail sales grew by a seasonally and inflation adjusted 0.7 per cent month on month in October after gaining 0.3 per cent in September. Analysts had forecast a 0.1 per-cent rise in October.

The increase also sets the stage for what retailers predict will be a buoyant Christmas shopping period.

'It looks as if German consumers have found their own therapy to cope with the debt crisis trauma: comfort shopping under the Christmas tree,' said ING Bank economist Carsten Brzeski.

The release of the retail sales data came after the German market research group GfK said on Monday that its forward-looking consumer confidence index projected an increase next month.

The Nuremberg-based GfK said the index is set to come in at 5.6 points for December compared with 5.4 points in November.

Figures also published last week by the statistics office showed household spending emerging as the key driving force behind economic growth in the third quarter.

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