Germany's jobless rate soars to three million

More than three million people are out of work in Germany after 114,000 lost their jobs in December, labour office figures show. It is Germany's first rise in unemployment in 33 months.


AFP - German unemployment in December rose for the first time in 33 months, with over three million people out of work, data showed on Wednesday as the recession in Europe's economic powerhouse begins to bite.

Putting further pressure on Chancellor Angela Merkel's government to counter what is forecast to be Germany's deepest post-war slump, the labour office said the number of jobless had risen in December by 114,000 to 3.1 million.

The unemployment rate now stands at 7.4 percent, a rise of 0.3 percentage points. Economists said up to 10 percent of the workforce could be without a job by the time Merkel stands for a second term in elections on September 27.

Even adjusted for seasonal fluctuations, unemployment in Europe's biggest economy rose by 18,000 from November -- the first such increase since February 2006.

The head of the labour office, Frank Weise, said in a statement: "2008 was the best year for the jobs market. Nevertheless, the December data show that the economic crisis has reached the jobs market.

"As a result, our optimism for 2009 has also been dampened."

In recent months, the German jobs market has shown surprising resilience in the face of the economic crisis but officials and analysts warned that the tide had now definitely turned.

The labour office acknowledged that the "positive underlying trend" in employment had now changed.

Alexander Koch, an economist at Unicredit, said December's data marked a "turning point" and predicted more people would lose their jobs as the economy spirals deeper into recession.

"The trend reversal cannot be halted and the negative dynamic on the labour market should pick up considerable momentum in the further course of this year," Koch said.

Ralph Solveen from Commerzbank said: "The recession has now reached the German labour market too."

Germany, the world's biggest exporter, is already mired in recession and experts believe the situation is set to deteriorate sharply before it gets better.

In a bid to stave off the worst effects of the downturn, Merkel's "grand coalition" is due later this month to launch a second stimulus package worth some 50 billion euros (70 billion dollars).

This follows an initial package worth over 30 billion euros (40 billion dollars) agreed in November last year that was deemed too puny.

Berlin was roundly criticised for acting too slowly and too cautiously to counteract the financial crisis, with Merkel dubbed "Madame Non" in some European quarters.

Efforts to hammer out a coherent response to Germany's economic woes have been partly hamstrung by the fact that the two parties in Merkel's grand coalition are already jostling for position ahead of elections on September 27.

The year ahead is expected to bring more misery on both the jobs and growth front, meaning the economy is likely to be one of the main battlegrounds in the election campaign.

Jennifer McKeown from Capital Economics said that a combination of weak consumer spending and falling global demand for German goods could lead to a slump in economic output of two percent in 2009.

Unemployment could rise towards the psychologically important 10 percent figure during the year, she added.

The influential DIW economic institute Wednesday slashed its forecast for growth this year from 1.0 percent to minus 1.1 percent, saying Germany was heading for its worst annual showing since 1949.

The president of the IFO economic institute, Hans-Werner Sinn told the Bild daily on Monday that he expected no recovery before 2011 and warned that unemployment could even hit four million.

Economists are now bracing themselves for more gloomy data due Thursday with the publication of key German manufacturing orders, which last month plunged 6.1 percent.

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