Unemployment set to rise as German election enters crucial stage
Berlin - Economists are forecasting that data to be released Tuesday will show German unemployment edging up in August in the wake of the global recession.
Despite signs that growth in Europe's biggest economy is gaining traction, the number out of work rose by a seasonally adjusted 30,000 last month, economists say the data will show.
The figures will be the last before Germany goes to the polls to elect a new government on September 27.
The prospects of unemployment climbing in August underscores the risks facing German Chancellor Angela Merkel as she mounts her campaign for reelection to a second-term.
This is despite figures showing the German economy climbing out of recession during the second quarter, which have helped to strengthen claims by Merkel supporters that she has successfully steered the nation through its biggest economic slump in more than 60 years.
The prospects of the ranks of the nation's jobless queues swelling by 30,000 in August will push the unemployment rate up from 8.3 per cent in July to 8.4 per cent last month, analysts forecast.
A rise in unemployment could also be expected to breathe some life into an otherwise lacklustre German election campaign, which so far has been characterized by almost a complete absence of issues.
"Although we have seen the recession come to an end and a significantly improvement in German industry, this will not be enough to quickly dismantle the overcapacity (in the economy)," said HypoVereinsbank economist Alexander Koch.
Unemployment is a lagging economic indicator and many economists expect the numbers out of work in Germany to climb in the coming months as the global recession starts to catch up with the nation's labour market.
The Paris-based Organization for Economic Cooperation and Development has forecast that German unemployment will hit 11.6 per cent in 2010.
This is likely to result in employment emerging as a crucial issue for Merkel if, as opinion polls show, she emerges victorious on September 27 and remains chancellor.
Normally the end of the summer vacation in Germany leads a fall in the August unemployment numbers.
But with only a tepid economic recovery expected to emerge in Germany, employers are likely to remain under pressure to trim their workforces.
Moreover, rising job fears could be expected to undercut consumer demand which has been a major force behind Germany's exit from recession.
As a consequence, the new German government elected on September 27 could take charge of an economy with sluggish household spending threatening to slow the pace of recovery.
That said, however, a recent string of monthly rises in unemployment have tended to fall short of analysts' predications.
This is essentially the result of state subsidized short-term labour market contracts, which have meant that employers have been able to avoid mass layoffs in the face of the contraction of the country's economy.
Seasonally adjusted unemployment fell by 6,000 to 3.48 million in July. However, the Nuremberg-based labour office said the drop was essentially the result of special technical factors.
Indeed, when the special factors were removed, seasonally adjusted unemployment, which reflects overall trends in the job market, rose by a less-than-forecast 30,000.
In the political more important seasonally unadjusted terms, economists expect Tuesday's will show a further 25,000 lost their jobs in August. (dpa)