Unexpected Fall In German Unemployment

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German unemployment unexpectedly fell in July, the first decline since October 2008, thanks to government measures.

The seasonally adjusted number of unemployed dropped 6,000 in July, data released by the Federal Labor Agency showed Thursday. Economists had forecast the number to rise 43,000. The jobless rate stood at 8.3%, unchanged from June, while it was expected to rise to 8.4%.

At the same time, the labor agency revised June's jobless increase to 27,000 from 31,000 reported initially.

In May, the labor office made some changes in the method of calculating unemployment figures. The new rule instructs the labor agency to exclude people attending training in a company as unemployed. Without this change, the number would have risen by 30,000 in July, the agency said.

Commerzbank analyst Eckart Tuchtfeld said the decline was surprising. He warned that companies, which have maintained production capacities through large-scale use of short-term work, will shortly establish that capacities are too high for the lower demand and may react with dismissals.

German unemployment was on the rise since November 2008 and in March 2009, it grew the most, by 66,000. The government expects unemployment to increase to 3.7 million this year and to 4.6 million in 2010.

Short-term work is helping the country to address the situation to some degree. But, most economists expect a sudden sharp rise in joblessness once firms pull out of this programme

On an unadjusted basis, unemployment increased 52,000, taking the total to 3.4 million and the jobless rate rose to 8.2% from June's 8.1%.

Earlier in the day, Germany's Federal Statistical Office announced that the ILO jobless rate stood at 7.7% in June, unchanged from the previous month. The number of unemployed amounted to a seasonally adjusted 3.35 million in June, compared to 3.32 million in May.

As a result of Chancellor Angela Merkel's spending plan, consumer confidence and business climate in the economy showed improvements in recent months. Merkel is seeking a second-term in office in September elections.

German unemployment unexpectedly fell in July, the first decline since October 2008, thanks to government measures. (Market News Provided by RTTNews)