German unemployment unexpectedly rose in October adjusted for seasonal factors. That was the first increase since early last year.
The unadjusted figures were slightly down, but economists said this confirms that Germany, which still has lower unemployment rates than elsewhere in Europe, is facing an underlying downturn and uncertainty over the euro zone debt crisis means firms are reluctant to hire.
Compounding fears about the effects of a slowdown in Europe’s biggest economy, the seasonally adjusted figures from the Federal Labour Office showed unemployment rose by 10,000 compared to an expected drop of 10,000. That pushed the unemployment rate up to 7.0 percent from 6.9 percent in September.
The unadjusted rate slipped to 6.5 percent.
“(The rise) confirms the euro zone’s largest economy is experiencing an underlying economic downturn,” said Jennifer McKeown, an economist at Capital Economics, adding the deterioration may mark the start of a trend.
She said the increase could hurt consumer spending, already under pressure from high inflation.
“The threat of further bailouts for the banking sector or peripheral euro zone economies will mean that cautious German consumers prefer saving to spending. The upshot is that as exports fall, consumers will not pick up the slack, leaving Germany at risk of recession,” she added.
Germany’s economy recovered quickly from the financial crisis and has been Europe’s main engine of growth.
But the pace of expansion is easing due to a global slowdown and uncertainty stemming from the euro zone debt crisis which is hitting investment and exports.