German jobless rate falls sharply

FRANKFURT (AFP) - German unemployment dropped sharply this month as spring brought another sign of recovery in Europes top economy, but undoing a short-work scheme might limit the need for many more new workers. Unemployment dropped to 8.1 percent of the workforce from 8.5 percent in March, according to unadjusted figures released Thursday by the Federal Labour Agency that serve as a basis for public debate. There was an unexpectedly strong springtime upturn on the labour market in April. The current trend is encouraging, said the agencys head, Frank-Juergen Weise. Improvements were seen in the tourism and construction sectors, which were hit by particularly cold and snowy winter weather through March, while an earlier end to the Easter holiday also probably contributed to the result. The seasonally-adjusted rate favoured by analysts fell for the fifth straight month and posted its sharpest drop since early 2008 to 7.8pc, the lowest level since Dec 2008, Capital Economics senior European economist Jennifer McKeown noted. Analysts polled by Dow Jones Newswires had forecast an adjusted rate of 8.0 percent. The drop highlights the current contrast between the German economic climate and the peripherys troubles, McKeown said in reference to troubled eurozone countries like Greece, Portugal and Spain. ING senior economist Carsten Brzeski put the improvement down to active labour market policies, including a government-subsidised short-work programme that lets companies cut workers hours, a scheme to be extended to March 2012. Trouble spots nonetheless remained in formerly communist areas of eastern Germany, and the highest unemployment, at 14.2 percent, was recorded in Berlin. Around 3.4 million people were looking for work in all, or 162,000 fewer than in the previous month, the labour agency said. The figures came two days after the GfK research group said that German consumer confidence had risen more than expected. But while greater labour market flexibility has helped keep unemployment from soaring, it has also caused disposable incomes to decline, which has kept private consumption subdued, Brzeski said. And UniCredit economist Alexander Koch noted that companies which had cut workers hours would normally raise them again as business improved, and as a result, firms will likely stay cautious in hiring new staff. Koch also noted however that an April survey of purchasing managers found their employment plans had climbed above the boom/bust threshold of 50 for the first time since September 2008. Employment expectations were also more positive in the latest poll by the Ifo economic institute, which has now climbed back to its highest level since May 2008.