German Unemployment Declines for 21st Month as Crises Fail to Deter Hiring

German unemployment fell twice as much as economists forecast in March as instability in the Middle East and the crisis in Japan failed to deter companies from hiring.

The number of people out of work fell a seasonally adjusted 55,000 to 3.01 million, the Nuremberg-based Federal Labor Agency said today. That’s the lowest level since June 1992. Economists predicted a drop of 25,000, according to the median of 31 estimates in a Bloomberg News survey. The rate declined to 7.1 percent from 7.3 percent of the workforce.

“Right now nothing is upsetting the healthy mix of export growth and domestic demand that is driving down unemployment in Germany -- that includes the catastrophe in Japan and political turmoil in North Africa,” said Mario Gruppe, an economist at NordLB in Hanover, Germany.

The euro rose 0.4 percent, trading at 1.4184 at 10:25 a.m. Frankfurt time, the third day of gains. The single currency has advanced 6 percent this year against the U.S. dollar.

German business confidence unexpectedly held near a record this month as the earthquake and tsunami in Japan and conflict in Libya failed to ruffle sentiment in Europe’s biggest economy. Unemployment has declined for 21 straight months now, shrugging off a surge in the price of commodities like energy and metals that are needed for manufacturing.

VW, Bosch

Volkswagen AG (VOW) plans to create 50,000 new jobs, 6,000 of them in Germany, after two-month global sales soared 18 percent, Europe’s biggest carmaker said on March 10. Robert Bosch GmbH, the world’s biggest auto-parts maker, will add 9,000 graduate jobs this year, 1,200 in Germany, the company said March 1.

According to the latest comparable data from the Paris- based Organization for Economic Cooperation and Development, Germany’s jobless rate was 6.5 percent in January, compared with an average of 9.9 percent for the 17 euro nations. France, Germany’s biggest European Union trading partner, had 9.6 percent unemployment, the U.S. 9 percent and Spain 20.4 percent.

Lower unemployment in Germany may be boosting private consumption, helping retailers. Globetrotter GmbH, a Hamburg- based maker of outdoor clothing, said on March 27 that it plans to add 450 jobs to its 1,650 staff as it expands to build holiday homes. OHG Netto Supermarkt GmbH, a foodstore chain, added 200 jobs at a new logistics center in Erfurt this month.

ECB Rates

Still, with rising import prices stoking inflation, policy makers at the European Central Bank indicated the Frankfurt- based bank will probably raise interest rates next month.

German inflation held at a two-year high in March after energy prices surged, the Federal Statistics Office said two days ago. As household purchasing power weakens, consumer confidence will decline for the first time in 10 months in April, market researchers GfK AG said. Retail sales unexpectedly dipped in February as higher energy prices curbed consumer spending, the Statistics Office said today.

“Import-price inflation is helping to erode the capacity of the economy to absorb new jobs,” Stefan Muetze, an economist at Helaba in Frankfurt, said in an interview. “The uncertain impact of Japan’s problems and conflict in North Africa add to a more volatile picture.”

German carmakers may consider government-aided shortened working hours due to a lack of parts from Japan, Handelsblatt newspaper reported on March 24, without being more specific. General Motors Co.’s Opel unit canceled shifts last week at German and Spanish plants before finding an alternative source for electronic components in the U.S.

Election Defeats

The decline in unemployment has yet to deliver a political dividend for Chancellor Angela Merkel. Voters in Baden- Wuerttemberg, the state with the lowest unemployment, ditched her Christian Democrats in March 27 elections after 58 years of unbroken rule. Merkel’s CDU was last month handed its worst election defeat since World War II in Hamburg, Germany’s richest state.

The jobless figures “again illustrate the German economy’s main dilemma: while the labor market remains the show case of the recovery, private consumption is still sluggish,” said Carsten Brzeski, an economist at ING Groep NV in Brussels, citing an increase in the number of low-wage jobs and higher energy prices. “Let’s hope the consumption recovery does not stop at the gas station.”

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Jeff Black in Nuremberg at jblack25@bloomberg.net.

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Craig Stirling at cstirling1@bloomberg.net

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