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German labour

market shows

weak movement

BONN: Data released for German unemployment in July confirmed that the spring wage round and high mark were preventing the jobless from sharing the fruits of the country's economic recovery, economists said.

"The labour market is at best flat. The July dip (in seasonally adjusted western German unemployment) only partially offsets June's rise. Firms are still laying people off after the spring wage round," said Julian Jessop of HSBC Markets in London.

The Federal Labour Office said earlier the number of people out of work in western Germany fell by a seasonally adjusted 5,000 in July from June to 2.551 million.

The Office said the unemployment rate in the region, based on unadjusted figures, rose to 8.3 percent from 7.9 percent in June. On an unadjusted basis, the number of jobless leapt by 95,000 to 2.549 million.

Labour Office President Bernhard Jagoda said the labour market remained weak and suffered the extra burden in July of lay-offs which took effect at the end of the second quarter, the holiday period and the ending of some apprenticeships.

Malcolm Barr of Chemical Bank in London said the strong rise in the unadjusted data suggested adjusted unemployment should have risen slightly and said there was confusion in the market about what adjustment factors the labour office used.

HSBC's Jessop agreed, saying: "The spring wage round has backfired on the unions. Unemployment could start to fall again later this year but only if workers accept some sort of cuts in benefits so that costs fall."

Many firms in Germany are looking at ways to increase the flexibility of their workforces in a country with highly restricted working hours.

Car maker Volkswagen VOWG.Fenters a crucial pay round this week where it is determined to wring more flexible working from its 100,000-odd domestic workforce.

It wants workers to accept Saturday as a normal working day which would not be subject to higher pay rates as is the case at present.

The company wants its workforce to work a longer week in the spring, when car demand is high, and a shorter week in the autumn when demand is slack.

Many other companies are mulling similar moves and are also shifting jobs abroad to avoid the country's high wage costs and to be less vulnerable to exchange rate fluctuations.-Reuter