German jobless total tops 4 million

The election battle is starting to hot up

German unemployment has gone back above the crucial 4 million mark, just ahead of a keenly-contested general election.

Economic growth is too weak and unstable to revive the labour market

Florian Gerster, Federal Labour Office

The seasonally unadjusted jobless total was 4.047 million in July, compared with 3.95 million in June.

While the rise was small in economic terms, it took Germany's jobless total above a politically sensitive level.

A dip in May to below 4 million had raised hopes that the economy, which earlier this year emerged from a brief recession, could be firmly on the mend.

But that view now seems optimistic, and the timing will be seen as a blow to Chancellor Gerhard Schroeder, who faces general elections in September.

Making hay

Mr Schroeder has already scrapped a pledge to reduce unemployment to 3.5 million by the elections.

Germans have little to cheer about this year

But his right-of-centre opponent, Edmund Stoiber, has nonetheless made political capital out of German economic hiccups.

He has pointed to his own successes as prime minister in the southern state of Bavaria, which enjoyed a mini-boom at a time when the rest of Germany was in recession.

Concern over the economy has been one of the main factors underlying Mr Stoiber's rise from outsider to leader in the opinion polls.

Little hope

Now, observers suspect the total is unlikely to dip back ahead of the elections.

"We're above 4 million again, and we're expecting that for August as well," said Christoph Hausen of Commerzbank.

"That's the last figure before the election, and it certainly will not help the present coalition in the polls."

Companies that have announced job cuts in recent weeks include Siemens, the country's biggest manufacturer, and Dresdner Bank.

Double-dip fears

The fear now is of underlying weakness in Germany's economic recovery, which had seemed relatively robust in spring.

Queues at the labour exchange betray the fragile recovery

"Economic growth is too weak and unstable to revive the labour market," said Florian Gerster, head of the Federal Labour Office.

"The seasonally-adjusted figure reflects an unfavourable cyclical trend."

This cyclical trend is the so-called "double-dip" recession, a slump punctuated by an apparent but transient recovery.

A similar phenomenon is currently being forecast in the US, and has contributed to the recent slumps in the stock market there.