UPDATE 3-German unemployment dips, outlook darker

Newswire

* Number of unemployed falls more than expected

* Economic outlook darkens, job market to suffer

* Retail sales rise unexpectedly in Oct (Adds labour shortage, minister quote)

By Madeline Chambers

BERLIN, Nov 30 (Reuters) - Unemployment in Germany fell more than expected in November, data showed on Wednesday, but economists warned the labour market cannot escape unscathed from a downturn predicted for Europe's biggest economy.

The seasonally-adjusted figures from the Federal Labour Office showed unemployment fell by 20,000 compared with an expected drop of 5,000, nudging the adjusted jobless rate down slightly to 6.9 percent. In October, unemployment rose for the first time since early 2010.

"The labour market is benefiting from good economic developments. There is no sign of a deterioration in November," said Labour Office board member Heinrich Alt.

Employment trends lag changes in growth, however, and the outlook for the German economy, which had rebounded strongly from the 2008/09 financial crisis, is darkening.

The deepening euro zone debt crisis and a global slowdown are set to hit exports and consumer confidence.

"The uncertainties caused by the financial crisis and the weak economy in the final quarter of the year have not hit the labour market. We're expecting that to happen, however, in the spring months," said Commerzbank economist Eckart Tuchtfeld.

Growth is expected to slow next year with estimates ranging from about 0.5 percent to 1 percent.

The Organisation for Economic Cooperation and Development (OECD) said this week Germany had entered a mild recession in the final months of 2011, hit by weaker world trade and a rapid loss of confidence due to the euro zone debt crisis.

Several German firms have already fallen victim to the tougher climate.

Manroland, which has about 6,600 workers, filed for insolvency last week after its owners failed to find an investor before the world's No.3 printing machine maker ran out of money.

German DIY store operator Praktiker said this month it would look at closing 30 loss-making stores which could affect around 1,400 employees in Germany.

BRIGHT SPOTS

But the picture is mixed.

German sportscar maker Porsche plans to add as many as 1,000 jobs a year as part of its growth plans.

In a further sign that Germany's economy may not face a severe or prolonged recession, retail sales rose last month.

They jumped 0.7 percent on a monthly basis in real terms though fell 0.4 percent on an annual basis. Economists, who warn that the figures are dated and volatile, had expected an unchanged reading month-on-month and a 2 percent annual gain.

German consumer morale brightened for a second month heading into December and willingness to spend rose to its highest level since January, figures released last week showed.

Economists say the positive consumer-related data bode well for the labour market -- a crucial factor for Chancellor Angela Merkel as she starts preparing for a 2013 election.

"Despite the euro crisis and bad economic outlook ... the thirst for labour is unquenched," said Labour Minister Ursula von der Leyen, adding that if anything, the problem was a shortage of skilled workers.

A Labour Office index this week showed demand for workers hit a record high in November, the highest level since the index began in 2005.

Von der Leyen said she was trying to make it easier for people from outside the EU to come to Germany to work.

A study from the BDA exporters and BDI industry associations and an economic think-tank showed German firms need 167,000 more skilled workers in the fields of mathematics, information technology, natural sciences and technology.

"A further slowdown of labour market dynamics is in the offing, but it should not be a trend reversal," said Carsten Brzeski of ING. (Additional reporting by Sylvia Westall, Holger Hansen, Joerg Voelkerling, Erik Kirschbaum, Natalia Drozdiak, Maria Sheahan; Writing by Madeline Chambers; Editing by Catherine Evans)

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