German unemployment set to jump in wake of recession

Berlin - German unemployment jumped in June, official data to be released Tuesday is forecast to show, amid expectations that the nation faces a surge in the numbers out of work as the global recession hits the jobs market in Europe's biggest economy. Analysts expect the Federal Labour Agency will say seasonally adjusted unemployment, which reflects overall trends in the job market, climbed by 40,000 this month. This will push the German jobless rate up to 8.3 per cent, from 8.2 per cent in May, analysts said. The prospects of another rise in unemployment also raises the risk of Chancellor Angela Merkel's government heading into September's general election against the backdrop of lengthening jobless queues. Up until now, government subsized short-term work contracts have helped companies avoid mass layoffs despite the weakening economic environment. But economists have warned that the numbers out of work could climb to 4.1 million by the end of 2009 with the German economy expected to contract by a dramatic 6 per cent plus this year. This underscores concerns around the world that the economic crisis could transform itself into a jobs crisis by the end of the year. The expected rise in German unemployment comes also despite a steady stream of forward-looking economic sentiment surveys pointing to expectations of a turnaround in both the European and the German economies as the year unfolds. However, a slew of bleak economic data continues to underscore the fallout for Germany as a result of the global recession with factory order books as well as production shrinking and exports slumping. Indeed, Berlin now expects the nation's jobless queues to swell by 450,000 to average 3.7 million this year before jumping by 900,000 to about 4.7 million in 2010.