German unemployment rate falls to 8 pct in Sept.

[September 30, 2009]  BERLIN (AP) -- German unemployment declined in September, but the fall was due to a seasonal upturn and statistical effects rather than any fundamental economic improvement, official figures showed Wednesday.

The unadjusted jobless rate in Europe's biggest economy was 8 percent, down from 8.3 percent in August, the Federal Labor Agency said.

A total of 3.346 million people were registered as unemployed -- 125,000 fewer than the previous month but 266,000 more than in September 2008.

However, "this is not a turnaround," said Frank-Juergen Weise, the head of the Federal Labor Agency. He said the main reason for the drop was the usual upturn in employment following the summer vacation.

In seasonally adjusted terms, the unemployment rate dipped to 8.2 percent from 8.3 percent, with 12,000 fewer people out of work than in August. Economists had forecast an increase of 20,000.

Still, the labor agency cautioned that the number would have risen by 10,000 but for a change made earlier this year under which thousands being trained by private job agencies were removed from the jobless figures.

Germany's export-dependent economy was hit badly by the global economic crisis before returning to modest growth in the second quarter.

So far, unemployment has been kept in check because many employers have used government-supported short-time working arrangements rather than laying off workers. However, it is widely expected to rise over the next year.

Timo Klein, an economist at IHS Global Insight in Frankfurt, said he still expects "seasonally adjusted unemployment to rebound in the fourth quarter and to increase during 2010, but monthly increments may be yet smaller than previously feared."

With consumer spending steady and exports and industrial activity picking up, "companies' willingness to hang onto the bulk of their work forces via short-time work arrangements over the past year could well be rewarded," allowing them to respond quickly to increased demand, Klein said.

Alexander Koch, an economist at UniCredit in Munich, said he still expects unemployment figures to rise to about 4.25 million by mid-2010.

"It will still take a long time for demand to regain pre-crisis levels and accordingly employment plans of firms remain negative, especially in manufacturing," Koch said.

Wednesday's jobless figures were the first since Chancellor Angela Merkel was re-elected. Sunday's election result allows her to ditch her right-left "grand coalition" of the past four years for a center-right government with a new, pro-business partner.

Both sides of the incoming coalition advocate tax relief to spur the economy, but it is unclear whether coalition talks starting next week will result in substantial cuts.

Merkel's room for maneuver is limited by the fact that Germany has racked up debt to tackle the crisis.

On Wednesday, the Federal Statistical Office said the deficit in the overall public budget increased to euro57.2 billion ($83.5 billion) in this year's first half from euro6.9 billion a year earlier as spending rose sharply and revenue declined. It did not give the figure as a proportion of gross domestic product.

Offering more evidence that the crisis isn't over, the VDMA industry group said orders for German machinery and factory equipment were down 43 percent on the year in August.

That was similar to figures from previous months, but VDMA chief economist Ralph Wiechers said that "the bottom should finally have been reached."

[Associated Press; By GEIR MOULSON]

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