German jobless rate slows

German employers have been hit by weak exports due to the global economic slump

BERLIN, Germany -- The number of unemployed workers in Germany rose less than expected in August, but remained above the politically sensitive four million mark as Europe's biggest economy continued to falter.

On a seasonally adjusted basis, the jobless level increased by 2,000 to 4.104 million last month, up from 4.102 million in July, the Labour Office said on Thursday. Analysts had forecast a rise of 20,800 in August.

The unadjusted unemployment rate eased to 9.6 percent last month from 9.7 percent in July, the office said, but added: "The seasonally adjusted data better reflect the unfavourable economic development than the adjusted figures."

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The lower-than-expected rise in the jobless number was due partly to the temporary efforts to repair the extensive damage caused by wide-spread flooding in Germany in August, the office said.

However, the brighter unemployment picture is not likely to help Chancellor Gerhard Schroeder's changes for re-election on September 22. He came to power on a pledge -- since abandoned -- to cut unemployment to 3.5 million during his term.

The August jobless numbers are also unlikely to convince many economists that the German economy is picking up speed after slipping into recession in the middle of last year.

Forecasts for growth remain low, with the country still faced with weak manufacturing activity and falling exports due to the global slowdown. Financial institutions and insurers have also been hit by the declines in global equities markets.

"The economic recovery that many have been hoping for will be much weaker than expected, and even if there is a moderate recovery that won't be enough to help the labour market," Rainer Guntermann, an economist at Dresdner Kleinwort Wasserstein, told Reuters.

"Companies will remain under pressure to cut jobs, and I don't see any clear turnaround in the labour market in the foreseeable future, especially when growth forecasts are being revised down."

Both business leaders and consumers have also expressed doubts about the economy, with key confidence surveys falling in recent months.

Economists do not expect the pace of economic recovery to pick up any time soon.

"We are of the view that we are not going to have a double-dip world recession, but I think that what we'll see is growth is going to be sub-par for a year or two," Glenn Davies, an economist at Credit Lyonnais, told Reuters.

"What you then find is quarter-on-quarter zig-zagging, and it [the recovery] never really takes off."

Manufacturing, retail sectors weaken

Meanwhile, there was more gloomy news on Thursday for Germany's manufacturing sector, as orders fell by 0.9 percent in July from the previous month.

The Finance Ministry said the decline was caused by weak foreign demand, which declined by 2 percent in July. Domestic demand stabilised during the month, it said.

Also on Thursday, the Federal Statistics Office said German retail sales fell by 0.9 percent in July from the previous month and were down 1.7 percent year-on-year.