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Last Updated: Thursday, 28 April, 2005, 10:52 GMT 11:52 UK
German jobless rate in shock dip
Sign in a German unemployment office: "Requests for unemployment benefit"
High unemployment levels have become a hot political issue
German unemployment has unexpectedly dropped in April, falling below the five million mark, as warmer weather prompted companies to hire more people.

The number of people out of work fell by 208,000 to 4.98 million, according to unadjusted figures from the Federal Labour Office.

The seasonally-adjusted figures also dropped below five million, falling by 79,000 to 4.89 million.

This drop cuts the unemployment rate to 11.8% from 12%.

Government officials predict that the jobless rate will continue to slide, despite Germany's sputtering economy.

On the up?

Unemployment has become a hot political issue, with Chancellor Gerhard Schroeder accused of failing in his election pledge to create a vibrant employment environment.

In the UK and the US, the rate of unemployment is closer to 5%.

If one looks at the entire economy, the picture hasn't really changed
Manuela Preuschl, Deutsche Bank

Economy Minister Wolfgang Clement said the drop in unemployment in April was evidence that the government's unpopular and hard-fought reform programme was starting to bear fruit.

"After the cold start and difficulties in the first quarter, labour market reforms are beginning to show their effect," he told a news conference.

The Labour Office predicts that unemployment is likely to fall again in May and June, though it is likely to pick up again in July.

Analysts were a little more circumspect.

"There is some uptrend," said Sandra Petcov of Lehman Brothers. "It's just not very strong at the moment. We need a bit more decisive momentum to get a recovery going."

Building boom

Helping the figures was the fact that the weather in March was so poor that many companies, especially in the construction industry, deferred hiring until April, analysts said.

With a sunnier, warmer April, hiring picked up, the statistical office said.

"There was almost certainly a weather element to the numbers in April," said Manuela Preuschl of Deutsche Bank.

"But if one looks at the entire economy, the picture hasn't really changed. One would need stronger economic impulses for there to be any really significant changes in the job market."

Earlier this week, Germany's six top economic institutes cut their growth forecasts for this year in half to 0.7%, compared with an earlier prediction of 1.5%.

They attributed the cut to the strong euro, high oil prices and slack domestic demand.

German growth outlook 'not good'
26 Apr 05 |  Business
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31 Mar 05 |  Business
IMF 'cuts' German growth estimate
02 Mar 05 |  Business
Five million Germans out of work
02 Feb 05 |  Business
Germany nears 1990 jobless level
04 Jan 05 |  Business
Country profile: Germany
28 Mar 05 |  Country profiles

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