German dole queue tops 4.3m

German unemployment rose slightly last month to set another post-war record, but analysts said the jobless rate had now peaked. According to figures released yesterday by the Federal Labour Office, seasonally adjusted unemployment rose by 5,000 in February, reaching 4.316 million. The tiny increase did not affect the adjusted jobless rate of 11.3 per cent.

Latest indicators suggest that the winter "growth pause" in German economic activity is coming to an end, raising expectations that EMU will go ahead on time. High unemployment, pushing up public spending and pressurising tax revenues, is hindering the German government's ability to meet the Maastricht criteria of government borrowing below 3 per cent of GDP and government debt below 60 per cent of GDP. But Gernot Nerb, economist at Salomon Brothers in London, said: "The growth outlook has improved and the government should find a way to come close to EMU targets."

Bernhard Jagoda, the Labour Office president, said he expected a slight decline in the unemployment figures in March. "In non-construction manufacturing areas, the rise in unemployment was noticeably smaller than overall," Mr Jagoda said. "This could mean that the worst is over in job losses in the manufacturing sector."

Nevertheless, the failure of the construction industry to pick up, despite the mild weather in February, was a disappointment. Most of the 500,000 jobs lost in the previous month had been in construction, but the sector has so far not started rehiring, and remains stagnant, especially in the formerly booming east.

Orders are on the rise, up by 2.4 per cent in January, according to figures released yesterday. Although the consumer market remained stagnant, orders for capital goods shot up by 10.1 per cent, suggesting the economy is about to turn the corner. Boosted by the low value of the German mark, foreign demand for German goods leapt in the same month by 7.3 per cent. A surprisingly sharp rise in business confidence is being matched by rising capital investment.

According to the German Chambers of Commerce and Industry (DIHT), which also unveiled its economic forecast yesterday, growth will not be as strong as the government anticipates. The DIHT expects the economy to expand by 2 per cent this year, half a per cent below official predictions. Of the 25,000 German firms surveyed, only 19 per cent want to increase their investments in Germany, and most of those will be aimed at rationalisation - a euphemism for redundancies.

That will trouble the government, which has pledged to halve the number of jobless by 2000, but not as much as economic underperformance.

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