BERLIN, Nov 6 - German unemployment fell by 12,000 in seasonally-adjusted terms in October as a result of labour market reforms, an informed source told on Thursday, a bigger drop than analysts had expected. Economists polled by predicted a drop of 5,000 in the seasonally-adjusted jobless total from 4.392 million reported in September , when the total fell by 14,000. In unadjusted terms, unemployment fell by around 55,000 to 4.152 million, lowering the jobless rate to 10.0 percent compared with 10.1 percent in September, the source told , referring to official data due to be released by the Federal Labour Office on Thursday at around 0855 GMT. The source said the seasonally-adjusted drop did not amount to a turnaround in Germany's labour market but resulted from new rules enacted by Chancellor Gerhard Schroeder's centre-left government, including steps to increase pressure on the unemployed to take available jobs. The decline will be welcome news to Schroeder, whose Social Democrats are at record lows in opinion polls of below 25 percent as the government is struggling to get its unpopular welfare cutbacks through parliament. The fall comes amid signs that Europe's largest economy is on the brink of a modest economic recovery after three years of stagnation. The government expects growth of between 1.5 and two percent in 2004, but given high labour costs, that rate will still be too low to generate jobs on a large scale, analysts say.
The president of the Federal Labour Office said last month that he did not see any major improvement in the jobs market until mid-2004. Surveys suggest German companies are unlikely to take on significant numbers of additional staff soon, relying instead on gains in productivity to cope with accelerating demand as the recovery takes hold. "A turnaround in the labour market is still a long way off," Lehman Brothers economist Sandra Petcov said on Wednesday. Some 35 percent of firms surveyed by the Cologne-based IW economic research institute recently said they plan to trim staff next year, even as 41 percent said they expect to step up production, the institute said on Wednesday. "Our autumn survey gives scant hope for improvement in the labour market," IW Managing Director Rolf Kroker said at a news conference in Berlin. "The employment outlook in the construction industry is particularly bad." Unajusted unemployment in western Germany was 8.0 percent in October compared with 17.3 percent in the east, the source said.//