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German unemployment edges up, surge feared

The German unemployment rate rose slightly to 8.3 per cent in August, official data showed on Tuesday and experts said it might soon surge when job subsidies run out.

world Updated: Sep 01, 2009 15:10 IST

The German unemployment rate rose slightly to 8.3 per cent in August, official data showed on Tuesday and experts said it might soon surge when job subsidies run out.

The data showed the lagging effects of the economic crisis on Europe’s biggest economy, despite figures on Tuesday pointing to a rise in retail spending.

The Federal Labour Agency said the number of people unemployed rose by 9,000 people from July to a total of 3.47 million on an adjusted basis, with a government scheme to subsidise shorter working hours “stabilising the labour market.”

Analysts polled by Dow Jones Newswires had forecast an increase of 30,000 unemployed workers and a jobless rate of 8.3 percent.

Labour Minister Olaf Scholz said in Der Spiegel magazine on Monday that unemployment would rise further in the coming months, but remain below four million.

“The economic collapse will of course lead to a jump in unemployment in the coming months,” Scholz said, before adding that “this year we will stay under the four million mark.”

A state scheme subsidising firms to cut working hours has held down a flood of jobless claims but experts warn that a steady trickle in recent months could soon become a deluge as the plans expired.

“The strength of the labour market will put to the test in the coming weeks when the first wave of short-time work arrangements will reach their ‘sell-by date´,” ING senior economist Carsten Brzeski said.

Capital Economics economist Jennifer McKeown noted that “the government subsidy, which encourages firms to retain workers for shorter hours, runs out after a maximum of two years.

“We fear that sharper increases in unemployment are to come in future,” she said.

But Germany has rebounded with unexpected speed from its worst recession in more than six decades, edging back to growth in the second quarter of this year with an expansion of 0.3 per cent.

Brzeski said the labour market now faced two opposing trends, with hiring intentions in the manufacturing sector moving off record lows and a brighter outlook in the chemical industry offset by thin order books elsewhere.

“The only thing that could really support and turn around the labour market is sustainable economic growth,” he said.