German unemployment keeps falling

German unemployment fell to a record low this month, data showed Tuesday, as the deep restructuring and wage moderation of recent years shielded Europe's biggest economy from the worst of the debt crisis. In nominal terms, the number of people registered as unemployed rose by 301,500 to 3.082 million in January, equivalent to a jobless rate -- which measures the unemployment total as a proportion of the population as a whole -- of 7.3 percent, data published by the Federal Labour Agency in Nuremberg showed. That rate was an increase from the December level of 6.6 percent, but labour agency chief Frank Weise insisted the headline increase in unemployment was solely due to seasonal factors. Unemployment tends to rise in the winter months as sectors such as the construction sector slow down and lay off workers due to the cold weather and the retail sector also lays off thousands of temporary workers hired especially for the busy Christmas season. "The favourable development on the labour market continued in January," Weise insisted. "Employment has increased further and demand for labour remains high," he said. Seasonally-adjusted data, calculated separately by the Bundesbank, showed that the jobless total actually decreased by 34,000 to 2.849 million this month, the lowest level since German unification in 1991. And the seasonally-adjusted jobless rate slipped to a record low of 6.7 percent in January from 6.8 in December. The figures were much better than expected: analysts had been pencilling in a drop of just 10,000 in the jobless total this month. The data are "even more encouraging than expected," said Annalisa Piazza, analyst at Newedge Strategy. The labour market continued to benefit from relatively solid domestic demand and a high degree of flexibility among companies thanks to the deep restructuring undertaken in recent years. Germany, like every other countryin Europe, may be facing unprecedented challenges, but "flexibility and sound fundamentals are helping to avoid a deep contraction in activity," the analyst said. "The numbers prove once again that the German labour market remains very healthy, thanks to previous reforms and moderate wage increases," said Postbank economist Marco Bargel. "Even the economic slowdown at the end of the year was not able to stop the trend. Other eurozone countries will be eyeing the German jobs miracle jealously," Bargel said. "Most other eurozone states are miles away from such a positive development." Indeed, the Eurostat data agency in Brussels calculated that eurozone unemployment hit a record 10.4 percent in December. Significant cost advantages achieved in Germany via long years of wage moderation have long been criticised by the country's trading partners. Thus, the favourable jobless data will therefore likely lead to increased calls on Germany to play a greater role in saving the euro, the analyst said. From a domestic point of view, the strong labour market will help shield the German economy from the worst of the eurozone debt crisis. Europe's biggest economy is traditionally highly dependant on exports, but with exports weakening in the wake of a global slowdown, domestic demand will increasingly take over as the engine of German growth, analysts said. The HDE retail sector federation calculated that retail sales rose by 2.4 percent in nominal terms across the whole of 2011 and would likely rise again by 1.5 percent this year. "Retail trade remains robust. We're sure it will be possible to raise sales for the third year in a row this year," said HDE chief Stefan Genth. Holger Schmieding, chief economist at Berenberg Bank, saw Germany as a shining example how "austerity and reforms, if done the right way, are the recipe for lasting economic success." Such reforms have "turned Germany from the 'sick man of Europe' into a good place to create jobs and invest," he said. Unusually mild weather in mid-January may have played a role in the pronounced decline in unemployment, the economist said. And gains in the labour market were likely to slow down in coming months. "But leading economic indicators already suggest that the German economy will return to growth this spring, provided that Germany manages to keep the euro crisis under control, as seems to be the case at the moment," Schmieding said.