LEAD: German unemployment falls as employers wave off debt worries

Jan 31, 2012, 9:29 GMT

Berlin - German unemployment fell more than expected in January, as companies in Europe's biggest economy stepped up hiring despite the ongoing debt crisis, data released by the Federal Labour Office on Tuesday showed.

In seasonally adjusted terms, unemployment fell 34,000 to 2.2849 million. Analysts had forecast a more modest decline of 10,000 in unemployment.

The drop represented the third consecutive monthly fall in the numbers out of work. Unemployment had jumped in October, bringing to an end 27 monthly declines in the nation's jobless queues.

The latest unemployment data is likely to add to signs that the German economy has quickly emerged from a slowdown at the end of last year caused by the debt crisis.

Earlier this month, the German statistics office said the nation's economy probably contracted by about 0.25 per cent in the fourth quarter of last year.

However, German business confidence jumped to a five-month high in January amid hopes the nation's economy might escape recession this year, a key survey released last week showed.

But, also last week, the International Monetary Fund (IMF) slashed its 2012 economic outlook for Germany, saying it now expects the nation's economy to grow by just 0.3 per cent this year, after it bounded ahead by 3 per cent in 2011.

In addition, the risks for Germany's economic outlook in the coming 12 months, in particular the eurozone debt crisis, could take a sudden turn for the worse.

Already, large parts of the eurozone, which includes Germany's major trading partners, are mired in recession as they attempt to knock their state finances into shape with hefty budget cuts.

While Germany's job market continued to improve, the numbers out of work in Spain hit 22.8 per cent at the end of last year.

There are now about 5.3 million people out of work in the eurozone's fourth biggest economy, which has also emerged at the centre of the debt crisis.

Back in Germany, in the politically important unadjusted figures, the labour office said the numbers out of work leapt by 302,000, to 3.082 million.

This pushed the unadjusted jobless rate up 0.7 percentage points to 7.3 per cent in January. A year ago, the unemployment rate stood at 7.9 per cent.