France and Germany lose jobs

German labour exchanges face large jobless rise

Unemployment is up again in France and Germany, in a sign that the eurozone's two biggest economies are still in the grip of a downturn.

Despite these figures we think household consumption will not slow down brutally

Jean-Louis Mournier, Aurel Leven economist

Figures leaked to the press ahead of official publication next week reveal that German unemployment rose by 45,000 in November, while data from French statistical agency Insee show that the jobless total in France rose by 15,000 in October.

The German and French economies have now been shedding jobs for nine and five consecutive months respectively.

Rising joblessness in the two leading European economies is expected to dent consumer confidence and spending, stifling growth across the eurozone as a whole.

German outlook gloomy

Analysts said the larger jump in German unemployment suggests that the country many be entering a protracted slowdown.

Although German unemployment traditionally increases in November in line with the suspension of seasonal jobs, the latest figures suggest that a long-term pattern of rising joblessness is emerging.

Germany's annualised jobless rate has now risen for three consecutive months, signalling the start of a statistical trend.

The German government added to the gloom on Friday by admitting that the country's growth rate could 'in a worst case scenario' fall to just 0.75% next year, down from official forecasts of 1.25%.

Rate cut pressure

The German government, which has pledged to cut unemployment, is sure to react by putting the independent European Central Bank under added pressure to cut interest rates.

The ECB's cautious approach to rate cuts this year despite the sharp slowdown in Germany has angered German political leaders, who accuse the bank of neglecting the eurozone's largest economy.

The ECB has cut rates by just 1.5 percentage points since the beginning of the year, arguing that deeper cuts would stoke inflation.

The US Federal Reserve, in contrast, has slashed the cost of borrowing by 3.5 percentage points since February in an attempt to stimulate the flagging economy.

French jobless rise below expectations

The latest increase in French unemployment wasn't enough to lift the main jobless rate from last month's 8.9%.

Most analysts had predicted an increase in the unemployment rate to 9%.

A greater-than expected 0.6% decline in French inflation during October, making it more likely that the ECB will agree to further rate cuts, gave sentiment an added boost.

"Despite these figures, we think household consumption will not slow down brutally," said Jean-Louis Mourier, economist at Paris-based stock brokers Aurel Leven.