German unemployment increased by the most in a year in March, further clouding the outlook for growth in Europe's largest economy. The number of jobless people rose a seasonally adjusted 44,000 from February, the Nuremberg-based Federal Labor Agency said. It was the third straight monthly increase. The adjusted unemployment rate rose to 10.4 percent from 10.3 percent. ``I don't see any reason why companies should feel inclined to resume hiring,'' German government adviser Bert Ruerup said in an interview. ``Recent declines in joblessness were more a sign of administrative changes than of a genuine economic rebound.'' German business confidence fell to a five-month low in March and optimism among investors dropped the most in 16 months. Concern about unemployment is deterring consumers from increasing spending, in turn holding back economic growth in the dozen nations sharing the euro.
Siemens AG, which employs 170,000 people in Germany, said last month it will cut 2,500 domestic jobs as it shifts some production to countries where wages are lower. Thomas Cook AG, Europe's second-largest tour operator, plans to reduce its German workforce by 10 percent by next year after a slump in demand. Today's report showed the number of people working in Germany fell 15,000 in January, the biggest drop in four months.
`Pace of Recovery'
If declines in the number of those employed ``regain momentum it would bring into question the pace of Germany's recovery and in particular the prospects of a revival in consumer spending,'' said Mike Taylor, an economist at Merrill Lynch & Co. in London. ``Employment data is a better guide to the economy than unemployment as the latter is subject to distortions.'' Germany's benchmark DAX Index fell 7.76 points to 4040.84 as of 10:24 a.m. in Frankfurt. The 4 1/4 percent German government bond due January 2014 rose 0.07, or 70 euro cents per 1,000 euro ($1,200) face amount, to 101.27 by 10:25 a.m., leaving the yield little changed at 4.08 percent. After three years of economic stagnation in Germany, Chancellor Gerhard Schroeder is trying to boost hiring by lowering employment costs, reducing jobless benefits and easing the protection workers have against being dismissed. To bolster the labor market, the government has introduced subsidized self-employment and brought in a program under which privately run agencies take on unemployed people to hire them out as temporary staff. While this cuts the number of registered job seekers, those taken on by the agencies are not necessarily working.
Recalculation
Unemployment fell in the second half of last year ``mainly because legal changes made it easier for the labor agency to eliminate those from the unemployment statistics who do not really want to work,'' said Joerg Kraemer, an economist at Invesco Asset Management in Frankfurt. ``However, this pool of unmotivated unemployed seems to be exhausted.'' A change in February in the way the jobless statistics are calculated also removed more than 100,000 people on training and job-placement programs from the register. Economics and Labor Minister Wolfgang Clement expects the number of jobseekers to decline in the course of 2004 as economic growth accelerates. Still, average unemployment this year will probably be higher than last year amid companies' hesitation to hire, his deputy Gerd Andres said last month. Invesco's Kraemer said growth, at 1.5 percent this year, is ``too weak to prevent employment from falling.''
Rate-Cut Calls
Schroeder and other politicians including French Prime Minister Jean-Pierre Raffarin have urged the European Central Bank in recent months to pare borrowing costs to shore up confidence and boost growth. The ECB ignored those calls Thursday when it left its benchmark lending rate at a six-decade low of 2 percent, awaiting more evidence about the strength of the euro region's recovery. ECB President Jean-Claude Trichet said a ``modest'' economic recovery is on track. The region as a whole is expanding at a faster pace than Germany, which accounts for a third of its economy. Manufacturing in the 12 euro nations unexpectedly grew at the fastest pace in more than three years in March as rising orders prompted companies to step up production.
While jobless numbers are climbing in Germany, job creation is increasing in the U.S., the world's biggest economy. It added 308,000 jobs in March, almost three times economists' expectations and the biggest gain since April 2000. Today's labor agency report said Germany's unemployment rate, adjusted for European Union standards, was unchanged at 9.3 percent from February, when it was the third highest in the region using the euro after Spain and France. The number of people out of work in western Germany, which accounts for more than 90 percent of national output, rose by a seasonally adjusted 31,000 in March, while the number of unemployed in eastern Germany rose 13,000. ///www.bloomberg.com