German unemployment falls, seen hitting floor soon

German unemployment falls, seen hitting floor soon

Nuremberg: German unemployment fell in June to its lowest level since December 2008, but concerns about the outlook for 2011 cast doubt over whether joblessness could fall much further.

Unemployment fell by a seasonally adjusted 21,000 to 3.23 million, Federal Labour Office data showed on Wednesday, recording a 12th consecutive monthly fall. The consensus forecast in a Reuters poll was for a drop of 25,000.

“The unemployment level will continue to fall during the course of the year," said Peter Meister, economist at BHF bank. “But it’s not clear whether we’ll slip below the 3-million level in 2010."

The headline unadjusted unemployment total fell by 88,000 on the month to 3.153 million, the Office said.

German Labour Office head Frank-Juergen Weise said there was a chance unemployment could fall below the 3 million level by the end of the year. He noted the economy performed well in the second quarter but he said there were doubts about 2011.

The fall in unemployment followed a jump in industrial orders in April.

“Due to the fact order books are filling up, companies are increasingly having to stop part-time work or employ new staff. We need to ensure we don’t get too optimistic though," said Joerg Zeuner at VP Bank.

Austerity drive

A survey of purchasing managers released earlier this month showed Germany’s services and manufacturing sectors both gave signs of slowing growth in June, suggesting the recovery in Europe’s largest economy will fade in the second half of 2010.

“The imminent austerity measures for balancing budgets in the euro zone are already clouding the outlook," said Zeuner. “Another dip in demand would put employment under pressure."

Chancellor Angela Merkel unveiled plans earlier this month for 80 billion euros in budget cuts over the next four years — a package she hopes will bring Germany’s structural deficit within European Union limits by 2013.

Earlier on Wednesday, Federal Statistics Office figures showed the number of people in work in Germany rose to 40.260 million in May from 40.199 in April.

“The increase in employment increases the willingness to spend and with it domestic demand. This strengthens our economy’s drive," said Economy Minister Rainer Bruederle.

However, a survey of Germans released earlier this month showed consumer morale will stabilise in July as planned government cuts unsettle households.

Economists did not expect unemployment to fall a lot more.

“The economy will likely worsen in 2011. That suggests the number will hold steady," said Andreas Scheuerle DekaBank.

Some German companies are already cutting jobs to shape up.

Generic drug maker Stada Arzneimittel said earlier this month it planned to cut about one in 10 jobs as it aims to double earnings by 2014.