German Unemployment Unexpectedly Declined in January

German unemployment unexpectedly declined in January, adding to signs that a pick-up in Europe’s largest economy is gathering pace.

The number of people out of work fell a seasonally adjusted 16,000 to 2.92 million, the Nuremberg-based Federal Labor Agency said today. Economists predicted an increase of 8,000, the median of 31 estimates in a Bloomberg News survey shows. Joblessness declined by 2,000 in December instead of a previously reported gain. The adjusted jobless rate dropped to 6.8 percent this month, matching a two-decade low.

The Bundesbank said last week that the economy appears to be recovering from its fourth-quarter slump, when gross domestic product may have dropped as much as 0.5 percent. Confidence among entrepreneurs and investors rose more than economists forecast in January and a gauge of activity in service industries climbed to a 19-month high.

“The German labor market convinced with a distinct robustness in the second half of last year and the beginning of this year,” said Heinrich Bayer, an economist at Postbank Research in Bonn. “No debt crisis, no economic weakness can hurt it. But it’s too early to sound the all clear because the labor market reacts with delay to economic developments. Unemployment could still rise.”

European Markets

The euro traded at $1.3550 at 12:18 p.m. in Frankfurt, down 0.1 percent today. European stocks fell for a second day, paring their biggest monthly advance since July, as companies from AstraZeneca Plc to Banco Santander SA reported earnings.

In the U.K., house prices rose in January as the Bank of England’s credit-easing program helped loosen the mortgage market, Nationwide Building Society said. The Swiss National Bank’s holdings in AA grade bonds increased in the fourth quarter, which may reflect downgrades to once top-rated nations such as France.

In Spain, inflation slowed faster than economists predicted in January, while the current-account surplus grew in November, with foreign investment almost tripling as the euro region’s debt crisis eased.

The Philippine and Taiwan economies grew more than forecast last quarter, and Singapore’s jobless rate fell to a five-year low, signaling an upswing at the end of 2012 that underscores Asia’s role leading a global recovery. U.S. consumer spending probably rose at a slower pace in December than in November, according to a Bloomberg survey ahead of a report due today.

Adding Jobs

In Germany, small- and medium-sized companies plan to add employees this year even as most of them expect the economy to stagnate, a poll of more than 3,000 businesses by the BVMW lobby of medium-sized firms showed last month.

“The German labor market is in a good position,” said Anatoli Annenkov, an economist at Societe Generale in London. “Wages are fairly robust and inflation is coming down. Real income is growing and domestic demand may help the economy to expand again in the first quarter of this year.”

SAP AG, the biggest maker of business-management software, forecast a gain in full-year earnings of as much as 12 percent on Jan. 23 as the company adds Internet-based programs to attract users.

While policy makers are still cautious to call an end to the debt crisis that’s pushed the euro-area economy into recession and forced five of its 17 members to seek bailouts, they are starting to become more optimistic.

Under Control

“The fire is under control,” German Deputy Finance Minister Steffen Kampeter told the BBC in a radio interview broadcast this week. “But we have to take care it will not start again.”

RWE AG, Germany’s second-biggest utility, plans to counter a “challenging” year by cutting investments by as much as 50 percent to offset losses from the phasing-out of nuclear power in the country, Chief Executive Officer Peter Terium said on Jan. 27.

German economic growth slowed to 0.7 percent in 2012 from 3 percent in 2011 and the Bundesbank predicts economic expansion will decelerate further to 0.4 percent this year. That compares to a contraction of 0.3 percent in the euro area, the country’s biggest export market.

Foreign sales dropped 2.5 percent in November amid weaker demand from the currency bloc, where services and factory output contracted for a 12th month in January.

France, the region’s second-largest economy, may succumb to recession in the first quarter and the slump in Spain, where one in four people is without a job, is deepening.

“The German labor market has lost a bit of its strength in the past months,” said David Milleker, chief economist at Union Investment GmbH in Frankfurt. “But it is now on its way to recovery and I expect a further gain in employment later this year.”

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