April 1 (Bloomberg) -- German unemployment fell more than expected in March to the lowest level since August 1992 as worldwide demand for cars, sports shoes and factory machinery prompted companies to add staff.

The jobless rate, adjusted for seasonal swings, declined to 7.8 percent from 8 percent in February, the Federal Labor Agency in Nuremberg said today. The median forecast in a Bloomberg News survey of 32 economists was for a decline to 7.9 percent.

``The progress achieved in the German labor market is tremendous,'' said Stephan Rieke, an economist at BHF-Bank AG in Frankfurt. ``But the problems stemming from the financial crisis in the U.S. have not reached German manufacturing yet.''

Today's report adds to signs the German economy is proving resilient to a slowdown in global growth, a record oil price and the euro rising to a high against the dollar. More people in work coupled with wage increases that exceed inflation may bolster household spending in Europe's biggest economy.

The U.S. dollar completed its worst quarter in four years against the euro yesterday. The unit climbed to $1.5641 per euro at 6:36 a.m. in New York from $1.5788 late yesterday. Crude oil for May delivery on the New York Mercantile Exchange traded at $101.19 at 12:26 p.m. London time.

Consumer confidence climbed for the first time in three months in April, business confidence unexpectedly rose for a third month in March and export growth accelerated more than expected in January, figures published last month showed.

Volkswagen, Puma

Volkswagen AG, Europe's biggest carmaker, plans to hire 8,500 workers in 2008, half of them in Germany. Puma AG, Europe's No. 2 sporting-goods maker, said Feb. 26 it will add 130 new jobs in Germany this year. German industrial production unexpectedly accelerated in January, bolstered by construction.

A slump in the U.S., the No. 2 market for German exports after France, has yet to affect manufacturers. The U.S. economy, hit by the effects of a mortgage crisis, will fail to grow for the first time in more than six years in the second quarter, according to Organization for Economic Cooperation and Development.

``The short-term economic outlook is much more encouraging in the euro area than in the U.S.,'' European Central Bank Governing Council member Christian Noyer said in Prague today. ``Even if our economies are slowing down, no recession lies on the horizon.''

The International Monetary Fund cut its outlook for economic growth in the U.S. this year to 0.5 percent from 1.5 percent and reduced the estimate for Germany to 1.2 percent from 1.5 percent, Germany's weekly newspaper Die Zeit said today.

26-Month Streak

European unemployment remained at a record low of 7.1 percent in February, the European Union's statistics office said today.

German unemployment has dropped 26 months in a row and fell more than expected in the last five. ``The very strong figures in recent months were distorted by the mild winter weather and that will probably reverse in coming months,'' said Dirk Faltin, senior economist at UBS Wealth Management Research in Zurich.

At 4.1 degrees centigrade, the average temperature in March was 0.6 degrees above its long-term average, the German weather service DWD said on its Web site. At an average 2.9 degrees, Germany's winter was the sixth-warmest since 1901, the DWD said.

The labor agency cut its forecast for the average unadjusted jobless total this year to 3.43 million from 3.5 million.

`Positive Effects'

``Developments in the U.S. will impact on Germany, but at the moment things are being overshadowed by the positive effects of exports to eastern Europe and Asia,'' Ralph Solveen, an economist at Commerzbank AG in Frankfurt, said March 28 in an interview on Bloomberg Television. ``Ultimately, we won't escape a slowdown.''

The dollar, which dropped to a record $1.5903 per euro on March 17, is eroding the competitiveness of German-made goods outside Europe. Oil costing more than $100 a barrel leaves companies and consumers with less money to spend.

German plant and machinery orders rose 10 percent in February from a year earlier, driven by domestic sales, which jumped 12 percent, the VDMA machine makers association said in a statement today. Foreign sales gained 9 percent.

With labor unions demanding a bigger piece of the economic pie to compensate for rising energy and food costs, consumer spending may fill the gap left by cooling foreign trade.

Pay Deals

IG Metall won a 3.6 percent pay rise for 103,000 textile workers for the 9 months through February 2009. German public- sector workers and the government yesterday agreed on a pay increase which the unions say is worth 8.9 percent over two years.

Inflation in Germany accelerated to 3.2 percent and European inflation leapt to 3.5 percent in March, leaving the ECB little room to cut interest rates as growth slows.

The adjusted number of people without work fell by 55,000 to 3.29 million, the labor agency said. In western Germany, the number of people out of work declined by a seasonally adjusted 36,000 to 2.15 million in March, while the number in eastern Germany dropped by 19,000 to 1.14 million.

According to the latest comparable data from the Organization for Economic Cooperation and Development, Germany's jobless rate was 7.6 percent in January, compared with 7.8 percent in France, 3.8 percent in Japan and 4.9 percent in the U.S. The OECD average that month was 5.5 percent.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net.

Last Updated: April 1, 2008 08:16 EDT