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Last Updated: Tuesday, 3 January 2006, 12:17 GMT
Surprise fall in German jobless
German trade union members protest high unemployment
German unemployment remains stubbornly high
Germany saw an unexpected sharp fall in the number of people out of work in December.

When adjusted for seasonal variations, the number of jobless people fell 110,000 to 4.64 million people.

The unadjusted figure, influenced by seasonal layoffs in the construction industry, still showed a slight rise.

But at 11.2%, the adjusted unemployment rate is the lowest in a year, and reinforces hopes that Europe's largest economy could finally be recovering.

New Chancellor Angela Merkel has - like her predecessor, Gerhard Schroeder - made tackling Germany's stubbornly high joblessness her top priority.

Her hopes of doing so rest on an improved economic performance, after years during which Germany has been one of the worst performers in the European Union.

One key economic survey, published in December by the Ifo institute, said stronger exports and higher investment were set to lift German growth to 1.7% in 2006, against forecasts of 1.2%.

Construction problems

Ms Merkel's cabinet is to hold a two-day meeting next week to agree policies to boost growth and create jobs.

Billions of euros in new spending ahead of the 2006 World Cup, which the country is to host, are likely to be at the centre of the package.

That should improve the outlook for the construction industry, traditionally one of the weakest spots in the winter unemployment picture.

Unadjusted joblessness usually rises in Germany at the end of the year, as the winter weather eats into the construction industry's activity.

But a relatively mild start to December 2005 meant fewer layoffs than usual, although some observers said heavy job-cutting earlier in the year had left fewer jobs to lose.

Other critics point to the previous government's labour reforms, which they say have created lower-quality jobs dependent on government subsidies.

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