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Wednesday, 5 December, 2001, 12:50 GMT
Germany's slowdown continues
German job centre
The number of jobless is unlikely to fall below a 3.5m target
Unemployment in the Eurozone's biggest economy continued to slide in November as service industries contracted.

The pace at which German joblessness rose, and the contraction in the service sector, was less marked than it had been in recent months.

But that offered little comfort to the 3.789 million people now out of work, amounting to 9.2% of the working population, up from 9% in October.

Unusually, the slowdown is affecting the Western states more than their poorer counterparts in what had once been East Germany.

But unemployment in the East is still more than twice that in the West.

"The global growth slowdown is having a particularly strong effect on western Germany due to the concentration of industry there," said Bernhard Jagoda, president of the German Labour Office.

Broken promises

Chancellor Gerhard Schroeder's election promise to cut unemployment to 3.5 million by election time next year is now looking virtually impossible.

In an initial reaction to the jobless figures, UBS Warburg economist Holger Fahrinkrug said the greater rise in the West was more significant because of the much higher spending power there.

"We have no reason to change our forecast that German unemployment will continue to rise next year, offsetting some of the expected employment increases in other euro area countries," Mr Fahrinkrug said.

"Hence, the German consumer is likely to continue to underperform."

With jobs likely to keep disappearing till at least the middle of 2002, state job-creation schemes are likely to be accelerated, he said, stripping perhaps 500,000 off the jobless roll.

But this kind of employment pays little more than unemployment benefit, he pointed out, and will make little perceptible dent in the household spending downturn.

Out of service

And it is not just manufacturing that is suffering, as the service sector figures showed.

Reuters' monthly index of activity in the sector came in at 45.1, up slightly from 44.2 in October.

But the rise gives little cause for relief. Any figure below 50 indicates contraction, and the November numbers marked the seventh straight month of decline.

Input prices actually fell slightly in November, thanks to falling interest rates and energy prices.

But that failed to improve margins, as prices continued to fall to 54-month lows.

See also:

16 Oct 01 | Business
Jobs woe for German economy
09 Oct 01 | Business
German unemployment rises
05 Sep 01 | Business
German unemployment falls
05 Oct 01 | Business
G7 plans to tackle slump
21 Sep 01 | Business
German business confidence falls
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