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German jobless rate falls to 7.5 pct in June

The number of unemployed people in Germany fell more sharply than expected in June with the jobless rate tumbling to 7.5 percent as summer work got into full swing in Europe's biggest economy.
/ Source: The Associated Press

The number of unemployed people in Germany fell more sharply than expected in June with the jobless rate tumbling to 7.5 percent as summer work got into full swing in Europe's biggest economy.

The German Federal employment office said Tuesday the number of unemployed Germans fell by 123,000 people for the month, bringing the total of unemployed to 3.16 million. The results beat analysts' expectations. Experts had forecast the number of unemployed to fall only by around 80,000.

The jobless rate was down from 7.8 percent in May.

"The positive development of the labor market is progressing," Frank Juergen Weise, the director of the employment office said. "Unemployment is falling and employment is growing further. Also, companies' demand for labor remains high," he said.

The employment office said the number of unemployed this June met the average of the last three years, and that labor rates typically rise as summer work gets into full swing. The office said the number of self-employed also rose during June.

The jobs news comes amid reports of drops in consumer confidence and rising inflation, driven by spiraling energy costs and a jump in food prices.

Yearly inflation in euro nations hit a record 4 percent in June, the EU statistics agency Eurostat said Monday, putting pressure on the European Central Bank to raise interest rates — something the bank is expected to do this week. That could further limit companies' expansion and capital expenditure plans as money would then become more expensive to borrow.

"The current fall in June unemployment bodes well for a continuing but less dynamic labor market upswing for the remainder of this year," Alexander Koch, an economist with UniCredit in Munich said in a research note.

"This is also underscored by the latest employment plans in the corporate sector."

However, Koch wasn't entirely convinced by all the employment office's calculations, noting that adjustment problems had biased previous labor market reports.

"The new short-term benefit regime for seasonal workers together with the mild winter temperatures led to a weaker than usual build-up in winter unemployment and subsequently to a weaker rebound in employment in spring 2008. Unemployment data from June and in the months ahead should provide a more accurate picture of the underlying dynamic on the German labor market again," Koch said.

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On the Net:

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