Surprise unemployment drop greets Merkel on first day in office

AFP - German unemployment fell in October, data showed Thursday, a welcome boost for Chancellor Angela Merkel as she began the first full day of a second four-year term at the helm of Europe's top economy.

The raw unemployment rate, the headline figure in Germany, fell to 7.7 percent from 8.0 percent in September, as Germany began to emerge gradually from its worst recession in 60 years.

The Federal Labour Agency, which published the data, said: "In comparison to the first half of the year and given the overall economic situation, this is a surprisingly positive trend."

Nevertheless, the head of the agency Frank-Juergen Weise, warned against getting carried away with the data.

"The economic crisis still showed its effects on the labour market in October ... We do not yet see a turning point," he said in a statement.

Analysts surveyed by Dow Jones Newswires had expected the jobless numbers to rise.

Despite the positive data, the financial crisis still resulted in a rise of 232,000 in the unemployed compared to the same month in the previous year.

Additionally, the improvement in the labour market outlook seemed to be more visible in the former West Germany, with 78,000 fewer unemployed there compared to a drop of 40,000 in the former communist East.

Government subsidies which allow firms to cut working hours has thus far prevented a flood of jobless claims but experts have warned that job losses could rise significantly in the coming months.

A study published Wednesday by the confederation of trades unions (DGB) said that one in nine Germans had lost their job since the start of the global financial crisis last year.

Merkel, who was formally sworn in as chancellor on Wednesday, has pledged a 24 billion euro (36 billion dollar) package of tax cuts to boost the ailing economy which Berlin believes will shrink by five percent this year.