updated 2/2/2005 9:26:27 PM ET 2005-02-03T02:26:27

German unemployment hit a new post-World War II high in January, passing the politically sensitive 5 million mark for the first time in Europe's biggest economy, government figures showed Wednesday.

The unadjusted jobless rate in Germany rose to 12.1 percent, with 5.037 million people out of work in the nation of 82 million, as a new benefit system swelled the ranks of the registered jobless, the government's Federal Labor Agency said. The total rose by 573,000 from December.

Germany's main employers federation said Chancellor Gerhard Schroeder's government should do more to reform the economy despite the increase, while the conservative opposition assailed the record of a leader who once promised to cut jobless numbers to 3.5 million.

Economics and Labor Minister Wolfgang Clement described January's jobless figure as "alarming." But he said it would rise again in February before dropping, then fall "significantly" in the second half of the year.

The labor agency said a new jobless benefit system introduced Jan. 1, which requires many social welfare recipients to register as unemployed for the first time, added at least 222,000 to the jobless figures and gave a more accurate picture. It also cited seasonal factors, such as a traditional winter slump in construction activity.

"The figures reflect what has really been the case in Germany for years, which we unfortunately have not yet been able to change fundamentally," Clement told reporters.

But Volker Kauder, the general secretary of the opposition Christian Democrats, said "this has nothing to do with new openness, but rather old failure to act."

The benefit change, aimed at increasing pressure on the unemployed to take jobs, is part of reforms introduced by Schroeder to help revive the economy, which grew by 1.7 percent last year after three years of stagnation.

Clement said the January figures underlined the need for the government to pursue its efforts.

Still, the head of Germany's main employers group, Dieter Hundt, said politicians must go further to improve the situation for business. Schroeder's labor market reforms and welfare-state trims "were only a start — more must happen," he told ZDF television.

The previous record dated to January 1998, under former Chancellor Helmut Kohl's conservative government, when 4.824 million people were out of work. This January's jobless rate, which was up from 10.8 percent in December, fell short of the record reached then of 12.6 percent.

Beyond the headline rise, Lorenzo Codogno, co-head of European economics at Bank of America in London, said he detected "tentative signs of improvement."

Codogno cited a rise in the number of registered job vacancies and seasonally adjusted jobless numbers that, disregarding the fallout from the new benefit rules, rose only slightly.

"We believe conditions should already be in place for a stronger recovery in employment and at least a stabilization in unemployment — which would in turn support income, consumption and make the expansion in the whole economy sustainable," Codogno wrote in a research note.

German unemployment has weighed on consumer spending, whose weakness has held back the country's export-driven recovery.

Official figures released Wednesday showed that retailers had a poor Christmas season, with sales in December down 2.7 percent from a year earlier and 0.3 percent lower than the previous month. That confounded economists' expectations of a rise.

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