German unemployment falls as employers wave off debt woes

By Andrew McCathie Jan 31, 2012, 13:28 GMT

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

In seasonally adjusted terms, unemployment fell 34,000 to 2.285 million - resulting in the jobless rate edging down to 6.7 per cent from 6.8 per cent in December. Analysts had forecast a more modest decline of 10,000 in unemployment.

For now, the labour office saw no end to the nation's job boom.

'The developments in the labour market in January built on the pickup last year,' said Labour Office chief Frank-Juergen Weise as he released the data, adding that demand for labour remained high.

The drop represented the third consecutive monthly fall in the numbers of out of work and the biggest drop since March 2011. Unemployment had jumped in October, bringing to an end 27 monthly declines in the nation's jobless queues.

The German jobless data is in marked contrast to other parts of Europe, with data also released Tuesday by the European Union's statistics office Eurostat showing jobless queues across the 17-member eurozone swelling by 20,000 in December.

The increase represented the eighth monthly gain in unemployment in the currency bloc.

At 10.4 per cent, the region's jobless rate now stands at its highest level since the launch of the euro 13 years ago. This follows a rise in unemployment in nations such as Spain, Portugal and Ireland, which have been at the centre of the debt crisis.

In the meantime, the latest German unemployment data is likely to add to signs that the nation's economy has already started to rebound 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 that the economy might escape recession this year, a key survey released last week showed.

Still, economists are forecasting slower economic growth to hit the job market this year.

'The expected weaker economic development in Germany means that the labour market could move sideways later this year,' said Commerzbank economist Eckart Tuchtfeld.

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

Also overhanging the German economic outlook is the risk that 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.

Based on the politically important unadjusted figures, the Nuremberg-based labour office said the numbers out of work in Germany leapt by 302,000, to 3.082 million.

This pushed the unadjusted jobless rate to 7.3 per cent in January from 6.6 per cent in December. A year ago, the unemployment rate stood at 7.9 per cent.