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Germany Showing Strength as Unemployment Holds at Two-Decade Low: Economy

Germany’s unemployment held at the lowest in more than two decades in February, adding to signs Europe’s largest economy is regaining some strength after shrinking in the fourth quarter.

The adjusted jobless rate held at 6.8 percent from January, the Nuremberg-based Federal Labor Agency said today. That’s the lowest since Germany’s reunification. The number of people out of work remained at 2.87 million after declining 26,000 in the previous month. Economists forecast a drop of 5,000 this month, the median of 29 estimates in a Bloomberg News survey showed.

Germany’s economy may help counter a slump in the 17-nation currency area as governments from Spain to Ireland toughen spending cuts, hurting hiring and consumer demand. While the European Commission on Feb. 23 forecast the region’s economy to shrink this year, German executives grew more optimistic this month and investor sentiment rebounded.

“Germans hardly feel affected by the euro-zone debt crisis -- the crisis has simply not reached the German labor market,” said Carsten Brzeski, an economist at ING Group (ILF) in Brussels. “Looking ahead, all available indicators still point to a further improvement of the German labor market” though “the job miracle should gradually come to an end.”

The euro traded at $1.3448 at 11:35 a.m. in Frankfurt, little changed on the day. Germany’s benchmark DAX Index rose for a second day, gaining 0.9 percent, while the Euro Stoxx 600 Index advanced 0.7 percent.

German Sentiment

The economy is already showing some signs of recovery after shrinking 0.2 percent in the fourth quarter. German business confidence rose to the highest in seven months in February while investor sentiment surged to a 10-month high. Consumer confidence will increase to a 12-month high in March, partly helped by falling unemployment, GfK SE (GFK) said yesterday.

Labor agency head Frank-Juergen Weise told reporters today that while there are risks that unemployment may exceed 3 million this year, the adjusted numbers for February “definitely don’t mark the turning point.”

“We’d need three months of rising unemployment and other negative indicators,” he said. “The situation is robust. What we saw this month was the impact of winter weather.”

Japan, China

Strengthening economies in Asia may help bolster export demand and encourage German hiring. In Japan, industrial output rose 2 percent in January from the previous month, the Trade Ministry in Tokyo said today. Economists in a Bloomberg survey forecast a gain of 1.5 percent. South Korean production climbed 3.3 percent, a separate report showed.

A Chinese manufacturing index for February, due to be released tomorrow, will show a third straight expansion, a separate survey of analysts indicates. Australia’s retail sales advanced in January for the first time in three months and India’s gross domestic product rose 6.1 percent last quarter from a year earlier.

In the U.S., a report today may show the world’s biggest economy expanded at a 2.8 percent annual pace in the fourth quarter, which would be the fastest in more than a year.

“The U.S. is improving, Europe is stabilizing, and Asia is chugging along at a healthy pace,” said Matthew Circosta, an economist at Moody’s Analytics Australia Pty Ltd. in Sydney. “China is likely to have a soft landing.”

Job Growth

German companies may create as many as 250,000 new jobs this year, including 80,000 in health and social services, 50,000 in information technology and 40,000 in engineering branches, the DIHK national industry and trade chambers said on Feb. 17, citing a survey.

German unemployment dropped every month but two since July 2009 in adjusted terms. By contrast, euro-area unemployment probably held at 10.4 percent in January, the highest in more than a decade, according to a Bloomberg survey. The European Union’s statistics office will release the report tomorrow.

“The fact that the pace of employment growth is moderating is to be expected,” said Simon Smith, chief economist at FXPro Group Ltd. in London. “That said, the gap between Germany and the rest of the euro zone remains very wide.”

To contact the reporter on this story: Brian Parkin in Berlin at bparkin@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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