May 31 (Bloomberg) -- German unemployment in May posted its biggest drop this year as business confidence near a 15-year high spurred hiring, making the expansion of Europe's largest economy more broadly based.

The number of people out of work, adjusted for seasonal swings, fell 93,000 from April to 4.6 million, the Federal Labor Agency in Nuremberg said today. Economists expected a decline of 20,000, according to the median of 34 forecasts in a Bloomberg News survey. The adjusted jobless rate fell to 11.0 percent from 11.3 percent.

``Economic activity strengthened in the first quarter,'' Eckhard Wurzel, an economist at the Paris-based Organization for Economic Co-operation and Development, said yesterday in an interview. ``We expect job creation to accelerate well into 2007 and that has to do with the improvement in the economy.''

German economic growth is accelerating as companies invest more to meet rising demand for exports. That helps to lower unemployment and may propel the country's economic growth rate to a six-year high.

The OECD yesterday maintained its prediction that the German economy will expand 1.8 percent this year, the strongest pace since 2000. Faster recovery in Germany would make it easier for the European Central Bank to raise interest rates, which council member Klaus Liebscher yesterday called ``very low.''

``This is a very strong figure,'' Christoph Rieger, a fixed- income strategist at Dresdner Kleinwort Wasserstein in Frankfurt, said of the jobless data in a televised interview today. Together with a drop in French unemployment to the lowest in 3 1/2 years in April, an ECB interest rate increase is ``no longer in doubt.''

Drop `to Continue'

German seasonally adjusted unemployment declined by 30,000 on average between November and May, the Labor Agency said. Board member Heinrich Alt at a press conference in Nuremberg today said he expects ``this trend to continue.''

SAP AG, the world's largest maker of business management software, has said it plans to hire about 3,500 people this year, 20 percent of them in Germany. Bertelsmann AG, Europe's biggest media company, plans to raise staff numbers to 90,000 by the end of the year, up 1,500 from a year earlier, Chief Executive Officer Gunter Thielen said in March.

The World Cup to be held in Germany from June 9 will add 50,000 temporary and 20,000 permanent jobs to the German economy, according to Labor Agency estimates. Temporary employment agencies are planning to create 400,000 new jobs by 2010, Volker Enkerts, head of the industry association BZA, said May 17.

Labor Costs

Moderate wage gains and reductions in non-wage labor costs have made German jobs more competitive. Germany posted the smallest increase in manufacturing labor costs among 16 European Union countries in the third quarter of 2005 compared with a year earlier, according to Federal Statistics Office data.

That's attracting companies such as Sweden's Volvo AB, Europe's second-largest truck maker, which is investing ``tens of millions of dollars'' to expand an excavation equipment plant in Germany, according to Tony Helsham, head of Volvo's construction equipment division.

Business confidence among Germany's skilled trades rose to the highest in five years in the first quarter, the industry's ZDH lobby said May 23, citing increasing domestic demand, continued high foreign orders and government measures.

The government's 25 billion-euro spending program, which includes public investments, more money for research and development and more generous depreciation rules, will help make growth ``more robust,'' Economy Minister Michael Glos said April 27, one day before raising the government's 2006 economic growth forecast for a second time in four months, to 1.6 percent.

Business Confidence

Confidence among German executives held near a 15-year high in May, suggesting the economy is weathering near-record oil prices and a rising euro. The Munich-based Ifo institute said its confidence index, based on a survey of 7,000 executives, slipped to 105.6 from 105.9 in April.

Oil prices, measured as Brent crude futures, have increased 20.4 percent since the start of the year. The euro is up 8.9 percent against the U.S. dollar this year, making German exports less competitive overseas.

Still, German retail sales rose the most in almost two years in April, the Federal Statistics Office said today, while consumer confidence is at the highest in more than four years, a survey by Nuremberg-based market-research company GfK showed May 29.

According to the latest comparable jobless figures published by the OECD this month, Germany's unemployment rate fell to 8.7 percent in March. That compares with a rate of 9.1 percent in France, 4.1 percent in Japan and 4.7 percent in the U.S. In the U.K., unemployment was 5 percent in January.

The number of people out of work in western Germany, which accounts for more than 90 percent of national output, fell by a seasonally adjusted 50,000 in May to 3.1 million, while the number of unemployed in eastern Germany declined by an adjusted 43,000 to 1.5 million, the Labor Agency said today.

In unadjusted terms, unemployment dropped to 4.54 million, the agency said. The unadjusted jobless rate fell to 10.8 percent from 11.5 percent.

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

Last Updated: May 31, 2006 05:30 EDT