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German unemployment rises as economy runs out of steam

Workers arrive for their change of shift at the Opel plant of Bochum.


Unemployment in Germany rose for the fifth month in a row in August as Europe's biggest economy runs out of steam amidst the euro zone debt crisis, official data showed Thursday.

As major companies such as car maker Opel announced short-time work schemes to cope with slumping demand, headline unemployment rose this month, with the total number of people out of work up by 29,100 in August from July to stand at 2.91 million, the Federal Labour Agency said.

The unadjusted jobless rate stood at 6.8 per cent in August, unchanged from July.

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Unemployment tends to rise in the summer as school-leavers sign on the dole and companies close for the holidays but even adjusted for such seasonal factors, unemployment is on the rise in Europe's top economy, the data showed.

The seasonally adjusted jobless total – which has been rising since April – rose by 9,000 to 2.9 million in August, the highest level since November 2011.

But here, too, the adjusted jobless rate, which measures the proportion of people registered as unemployed against the working population as a whole, was at 6.8 per cent, unchanged since December.

"The German economy did not grow much in the second quarter. The slower growth is making itself felt on the labour market," the labour agency said in a statement.

ING Belgium-based economist Carsten Brzeski said the data were "a clear signal that the best times of the German labour market are over."

The strong labour market has been one of the main drivers of German growth so far this year, the analyst said. Low unemployment, record high employment and wage increases have boosted private consumption and helped cushion the industrial slowdown.

"Looking ahead, however, it is doubtful whether private consumption can really take over the baton as main growth driver for the German economy," Mr. Brzeski warned.

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"Today's numbers provide further evidence that the labour market is gradually losing steam and that the positive impact on the economy should peter out towards the end of the year."

Berenberg Bank economist Christian Schulz also believed that the economic deceleration – gross domestic product growth slowed to 0.3 per cent in the second quarter from 0.5 per cent in the first – and the euro confidence crisis are affecting Germany's job market.

"More important than the unemployment data is that positive employment trends seem to have passed their peaks," Mr. Schulz said.

Separate data published by the federal statistics office Destatis showed that the number of people in work in Germany stood at 41.6 million in July, a drop of 0.1 per cent from the previous month.

Sylwia Hubar at Natixis said she was expecting "rather unfavourable labour market developments in the third quarter mainly due to risks and uncertainties concerning the euro zone debt crisis."

However, the labour market was expected to remain stable in the fourth quarter of 2012 and to improve in a more favourable environment in 2013, she predicted.

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Newedge Strategy analyst Annalisa Piazza also said that although the labour market was set to moderate in the latter part of this year, "it is still benefiting from past structural reforms and solid activity."

The robust labour market "remains one of the main factors supporting consumer confidence and spending as households are confident that their disposable income is well protected despite the weaker business cycle," she said.

"As such, moderation in activity remains the baseline scenario for Germany in the second half of this year, but we rule out a full-blown recession," Ms. Piazza concluded.

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