Fall in unemployment raises hopes in Germany

FOR THE first time in three years, Germany's seasonally adjusted jobless rate fell back last month, raising hopes in government circles that the economic recovery is beginning to have an effect on the country's appalling level of unemployment.

According to figures released by the Federal Labour Office yesterday, adjusted unemployment fell to 4.324 million in May, the first time a decrease had been recorded since 1995.

The unemployment rate, which is based on unadjusted data, fell to 10.9 per cent, compared with 11.4 per cent in April. The number of people out of work fell by 58,300 in seasonally adjusted terms from 4.384 million in April.

The signs of improvement in the jobless figures were particularly welcome as the council of the new European Central Bank held its first meeting in Frankfurt yesterday.

Wim Duisenberg, its president, said no policy decisions were taken; but the ECB will have to co-ordinate members' interest rate decisions in the run-up to 1 January when the single currency starts. The level of rates in Germany will have to rise, although no move is expected at the Bundesbank's council meeting today.

Though Chancellor Helmut Kohl's government saw in the figures a vindication of its policies, the labour office sounded a note of caution. "The positive jobless development in May doesn't allow us to sit back," said Bernhard Jagoda, the labour office president. "It's only a nice intermediate goal which we achieved."

Economists also noted that the fall in the number of jobless - the biggest in unadjusted terms for May since 1990 - was partly due to make-work schemes that have received extra funding in the run-up to September's elections.

The government would not hear of such caveats, however. "The economic upturn is now feeding through as an increasing improvement in the labour market situation," said Gunter Rexrodt, the Economics Minister. "No serious observer will now deny that we have moved through rock bottom in the labour market as well."

"I think that by the end of 1998 we will have around 300,000 fewer unemployed than a year earlier," he added. "This will mean the average unemployment rate will be lower than in 1997."

The government's optimism stems from the gathering pace of economic recovery. Figures released last week showed that GDP in the first quarter of this year was 3.8 per cent more than in the corresponding period in 1997. Such growth rates have not been seen since German reunification in 1990.

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