Germany's jobless numbers decline

By Rainer Buergin  |   2008-7-2  |     NEWSPAPER EDITION

GERMANY'S unemployment rate declined to the lowest level in almost 16 years in June, as Europe's largest economy resists a global slowdown.

The number of people out of work, adjusted for seasonal swings, fell 38,000 from May to 3.27 million, the Federal Labor Agency said yesterday.

Economists expected a drop of 14,000 in June, according to the median of a Bloomberg News survey of 38 forecasts. The adjusted unemployment rate dropped from 7.9 percent in May to 7.8 percent, the lowest since August 1992.

"With annual growth above 1.3 percent, companies are still hiring," said Thorsten Polleit, chief German economist at Barclays Capital in Frankfurt. "We're not facing an abrupt end to employment growth, but maybe a moderation. It's possible that the jobless rate will even decline further."

Forward-looking economic reports such as the Ifo institute's business confidence measure and manufacturing orders indicate that German growth is set to slow.

While unemployment rose last month for the first time in more than two years, companies are still working on backlogs for orders. Export sales, which rose more in April than economists expected, are still providing support.

"We had a few doubts in May because there was an increase," Frank-Juergen Weise, the head of the Labor Agency, said in an interview on Bloomberg Television. "But the positive trend for this year is unbroken from our point of view."

The median of five forecasts published by economic institutes last month suggests the economy will expand 2.2 percent this year before slowing next year to growth of 1 percent next.

The economy may have shrunk in the second quarter after expanding 1.5 percent in the first three months, the strongest rate in 12 years, Deputy Economy Minister Walther Otremba said last week.

Siemens AG, Europe's biggest engineering company, plans to eliminate 6,400 jobs in Germany. Wilhelm Karmann GmbH, the auto supplier that builds convertibles for companies such as Volkswagen AG, has already cut 500 of its 5,000 workers and may cut another 1,000.

But companies cutting thousands of jobs are the "exception," said Hans-Werner Sinn, president of Ifo.