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Thursday, June 10, 1999 Published at 12:23 GMT 13:23 UK

Business: The Economy

German unemployment drops below 4 million

German factory workers are still facing unemployment

Unemployment in Germany has fallen to below four million for the first time in more than a year.

The number of people looking for work fell to 3,998,000 in May, or 10.2% of the workforce, compared to 4,145,000 in April, a rate of 10.7%.

[ image: Unemployment is higher in the former East Germany]
Unemployment is higher in the former East Germany
But the head of the Federal Labour Office, Bernhard Jagoda said that "there were no positive impulses from the economy" that had contributed to the fall.

Rather, he attributed the decline "primarily to the usual seasonal upturn," with increased employment opportunities in construction and hotel and catering during the summer.

Unemployment continued to be far higher in the former East Germany, where the rate was 17%, compared to the rest of Germany, where unemployment stood at 8.6%.

"GDP growth is not so high that it will be a stimulus for the labour market. I think the main point is that there is no impetus for improving structural unemployment," said Lothar Hessler of HSBC Trinkaus Dusseldorf.

Nevertheless the news boosted the euro, which recovered to $1.05 for the first time in two weeks.

In early European trading the euro was worth $1.0522, up from $1.0477 in Tokyo overnight.

The dollar has weakened substantially on foreign exchange markets on the news of a revival in the Japanese economy.

Industrial production up

There was also some positive news for the hard-hit German manufacturing sector.

Industrial production in April increased by 1% on the previous month, compared to a 0.1% increase in March.

Output growth was strongest in the capital goods and durable goods sector, including items like machinery and automobiles.

Consumer goods output continued to fall, demonstrating the weakness of domestic demand.

But the German finance ministry cautioned that the figures might be revised downwards, "as would likely be the case with the manufacturing order output" for April released earlier this week.

Manufacturing orders increased by 3.3% in April, according to figures released on Monday.

German GDP also rose in the first three months of 1999, leading some economic forecasters to increase their estimate of full-year growth above the current consensus of 1.7%.

Business confidence, however, as measured by the long running Ifo index, fell to a new low in May of 89.6.

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