German Unemployment Unexpectedly Rises Amid Euro Crisis

German unemployment unexpectedly rose in March as renewed tensions in financial markets increased concerns the euro region’s recovery will falter.

The number of people out of work increased a seasonally adjusted 13,000 to 2.94 million, the Nuremberg-based Federal Labor Agency said today. Economists had predicted a decline of 2,000, according to the median of 24 estimates in a Bloomberg News survey. The adjusted jobless rate held at 6.9 percent, slightly above a two-decade low of 6.8 percent.

The euro area, the country’s largest export market, remains mired in recession and Cyprus’s botched bailout is weighing on German confidence. Still, the labor market has helped boost consumption, with a second increase in a row for retail sales last month supporting the Bundesbank’s forecast that the economy will return to growth this quarter.

“The harsh and long winter hurt Germany’s labor market, but the increase in unemployment by 13,000 in March will probably remain a temporary blip,” said Christian Schulz, senior economist at Berenberg Bank in London. “The job market may not be quite as buoyant as in the last couple of years but it remains very healthy.”

Job Cuts

The euro recovered after earlier losses and was trading at $1.2715 at 12:49 a.m. in Frankfurt, up 0.3 percent from yesterday. Europe’s benchmark Stoxx 600 index rose 0.6 percent to 294.25.

In the U.K., services industries expanded in January, indicating some strength in the economy at the start of the first quarter. House prices rose 0.8 percent in March, the first annual increase since February last year, Nationwide Building Society said today, adding that the outlook is “unusually uncertain.” Consumer confidence remained unchanged.

In the U.S., revised figures from the Commerce Department may show the economy expanded at a 0.5 percent annual pace in the fourth quarter, faster than the government’s previous estimate of 0.1 percent growth, according to the median forecast in a Bloomberg News survey.

The European Central Bank cut its economic forecasts this month and now expects the euro-area economy to shrink 0.5 percent this year before growing 1 percent in 2014. While ECB President Mario Draghi foresees a gradual recovery later this year, the economic risks are still “on the downside,” he said on March 7.

Siemens AG, Europe’s biggest engineering company, is preparing to eliminate as many as 1,400 jobs at three sites of its energy and infrastructure businesses to bolster profitability, according to two people familiar with the matter.

Export Markets

Some German companies are making up for lower demand from the 17-nation currency bloc with sales to faster-growing markets outside Europe.

Daimler AG’s truck division plans to increase vehicle sales, profit and market share this year on its expansion in emerging markets and demand in Brazil, Andreas Renschler, head of the carmaker’s truck unit, said on March 13.

Schaeffler AG, the industrial-bearing maker that’s the biggest investor in car-parts producer Continental AG, said last week demand in North America and Asia will more than offset a drop in Europe to allow sales growth in 2013.

Chinese industrial companies’ profits rose 17.2 percent in the January-February period, extending a four-month streak of gains and bolstering a rebound in the world’s second-biggest economy, the National Bureau of Statistics said today.

Domestic Demand

The Bundesbank forecasts growth of 0.4 percent this year, with exports and factory output helping the German economy gather momentum.

Consumption may get a boost from higher wages. German workers won deals of as much as 6.5 percent last year and IG Metall, the country’s most powerful labor union, is seeking pay increases of 5.5 percent in 2013.

German retail sales unexpectedly rose for a second month in February, adding to signs the domestic economy is returning to growth. Sales, adjusted for inflation and seasonal swings, gained 0.4 percent from January, when they surged a revised 3.0 percent, the Federal Statistics Office in Wiesbaden said today.

“The German labor market is robust, despite the uncertainty about the euro area,” said Lothar Hessler, an economist at HSBC Trinkaus & Burkhardt AG in Dusseldorf. “The unemployment rate will move sideways this year before posting new record lows in 2014.”

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