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Buoyant economy boosts German labour market

NUREMBERG: German unemployment fell for the fourth month in a row on Tuesday, reaping the benefits of economic growth, a weaker euro and fewer young people entering the workforce.

Data released by the Federal Labour Office showed German unemployment fell to 3.959 million in January, adjusted for seasonal factors, giving a rate of 10.1 percent, more upbeat than many analysts had anticipated.

However, the figures highlighted the stark difference between the sluggish economy of the former communist east and the more dynamic economy of west Germany.

"In western Germany at least the jobs market has continued to improve," Labour Office chief Bernhard Jagoda said.

The seasonally adjusted decline of 13,000 in the east was explained to a large extent by job creation schemes being maintained at higher levels than in previous winters.

"If one left that aside, seasonally adjusted unemployment would be unlikely to have changed much," Jagoda said.

Unadjusted unemployment rose to 4.293 million in January, but German raw jobless figures usually rise strongly in winter as bad weather hits key industries such as construction.

The unadjusted total was up 246,200 from the end of December but that was down 161,800 from a year ago, Jagoda said.

The Labour Office chief said he expected the January trend of a falling seasonally adjusted jobless total and a rising unadjusted total to continue in February. Both values would fall in March with the onset of spring.

David Thwaites at BNP in London said the figures showed the trend was moving down, but stronger growth was needed if markets were really to be convinced by the revival.

"Until we see Germany notch up three or four percent growth rates, I think you have a question mark about how fundamental this improvement really is," he said.

Analysts say a falling birthrate means fewer young people will enter the workforce this year.

"Demographic and seasonal factors are coming into play and pulling the numbers down. But I think there's going to be a limit until the growth numbers start to improve," Thwaites said.

Joerg Kraemer at Invesco in Frankfurt said that the foreign exchange markets in particular needed to be sure that any improvement was down to more than mere demographics.

"Last year, about 80 percent of the decline was caused by a fall in the number of people looking for jobs. That's what the forex markets know. The figures suggest the economy is doing better than it really did," Kramer said.

Although the weakness of the euro against the dollar and other international currencies has worried some commentators in recent months, Jagoda said it was a key factor behind the improvement in the German labour market.

"We should seize the strength of the dollar and its impact on exporters as an opportunity," Jagoda said. "I think it will have an impact. All signs are positive."

January figures already showed employment in key exporting industries such as the chemicals, engineering and automotive sectors were benefiting from rising exports, he said.-Reuters