(Updates with comment from economist in fourth paragraph.)
Sept. 29 (Bloomberg) -- German unemployment declined more than economists forecast in September, suggesting the labor market in Europe’s largest economy is weathering the region’s worsening debt crisis.
The number of people out of work fell a seasonally adjusted 26,000 to 2.92 million, the Nuremberg-based Federal Labor Agency said today. That’s the biggest drop since April. Economists had forecast a decline of 8,000, the median of 24 estimates in a Bloomberg News survey showed. The adjusted jobless rate slipped to 6.9 percent from 7 percent in the previous month.
Germany’s unemployment has reached the lowest level since the country’s reunification two decades ago after increasing global export demand prompted companies to step up spending and hiring. That growth momentum has been sapped by a possible recession in the U.S. and the threat of a renewed financial crisis that could be triggered by a sovereign default in Greece.
“We hear a lot of talk of recession and weakness, but the labor market doesn’t reflect that right away,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “Given the uncertainty, companies might become more cautious regarding investing and hiring. I don’t expect unemployment to rise over the coming months, but show more of a stagnation.”
The euro rose after the release, trading at $1.3653 at 10:45 a.m. in Frankfurt, up 0.8 percent on the day.
Bayerische Motoren Werke AG Chief Financial Officer Friedrich Eichiner told reporters on Sept. 8 that the Munich- based carmaker’s plants are “working at full tilt.” German rival Audi AG is hiring staff to boost output and sports-car maker Porsche AG is seeking to fill about 130 engineering positions at its Leipzig factory.
German spending and output have helped power the region’s expansion. Export growth accelerated in the second quarter, helping counter a drop in consumer demand and construction output. Imports increased 3.2 percent in that period, up from 1.7 percent in the previous three months.
In September, business confidence fell less than economists forecast. The Ifo institute in Munich said on Sept. 26 its sentiment index, based on a survey of 7,000 executives, dropped to 107.5 from 108.7 in August. Economists in a Bloomberg survey had projected a drop to 106.5.
Germany’s harmonized jobless rate was 6.1 percent in July, according to the Organization for Economic Cooperation and Development. That compared with 9.1 percent in the U.S., 9.9 percent in France and an OECD European average of 9.4 percent.
“We’re seeing the growth dynamic running out of steam a bit, but I don’t think there will be a fundamental change in the labor market,” said Alexander Krueger, head of capital market analysis at Bankhaus Lampe KG in Dusseldorf, Germany. “Employment will hold up at a high level.”
Investor concern that European leaders are not taking sufficient action to stem the region’s spiraling debt crisis has weighed on equity markets. Germany’s benchmark DAX index has tumbled 22 percent over the past two months and the euro depreciated 5 percent against the dollar in that period.
Germany’s lower house of parliament, or Bundestag, votes today on measures to enhance the European bailout fund, or European Financial Stability Facility. Even though support from the opposition ensures passage, Chancellor Angela Merkel has struggled to rally votes to secure a majority within her own coalition as lawmakers balk at further German funding.
Greek Prime Minister George Papandreou this week won parliamentary backing for a property tax to meet deficit- reduction targets required to receive an 8 billion-euro ($11 billion) aid payment and avoid a sovereign default. Countries such as Spain and Ireland have also been forced to toughen austerity measures and step up spending cuts.
With European governments seeking ways to plug their budget gaps, German companies may struggle to maintain their sales growth. Exports unexpectedly declined in July and manufacturing growth slowed this month, underscoring signs the economy is losing momentum. German investor confidence this month fell to the lowest in more than 2 1/2 years.
The International Monetary Fund on Sept. 20 lowered its growth forecast for both Germany and the euro region this year and next. The European Commission on Sept. 15 cut its euro- region growth forecasts for the second half and warned the economy may come “close to standstill at year-end.”
Bernhard Maier, sales chief at Porsche, said the carmaker will be able to weather a global slowdown.
“I’m very confident that we’ll have a chance to keep growing next year even if economies are cooling down somewhat,” he said in an e-mailed response to questions. “We’re seeing no reaction to our order intake and sales” from recent stock- market turbulences.
--With assistance from Andreas Cremer in Berlin. Editors: Simone Meier, Jennifer M. Freedman
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