Unemployment drops to 8.8 percent

As some of German companies added summer hires the ranks of jobless people in the country slipped lower in August, dipping to 8.8 percent from 8.9 percent in July, the government announced Thursday.

The number of unemployed fell to 3.705 million in August, from 3.715 million in July, but was still higher than the 3.687 million without work in June, according to figures released by the state jobs agency.

Adjusted for seasonal swings, such as summer hires and vacation staffing, the number of people out of work fell by 15,000, keeping the adjusted jobless rate unchanged at 9 percent from July and at its lowest ebb in 14 years.

"The good economic backdrop continues to have a positive effect on the labor market," said Frank Weise, the head of the German Labor Agency.

Timo Klein, senior economist for Germany for London-based Global Insight, said the small drop in unemployment stemmed "from full-time jobs paying social security contributions or from part-time or temporary employment."

He said the jobless rate in Germany is predicted to hover at just around 9 percent the rest of the year and "decline further to 8.2 percent in 2008."

Germany was plagued for several years by near-zero economic growth and double-digit unemployment.

The jobless rate peaked at 12.6 percent in February 2005, when the number of Germans out of work reached record for post-reunification Germany of 5.216 million.

Since then, the economy has been buoyed by increased exports and by consumers' increased willingness to spend. Business, investor and consumer confidence surveys are all soaring.

Fueled by demand abroad for its automobiles, computer chips and home appliances, German companies have been hiring to fill demand for such orders by expanding capacity at production plants.

"Although the decline in August was less than expected, the outlook for a continuation of the solid labor market upswing remains optimistic," said Alexander Koch, an economist at Unicredit in Munich.

"Assuming no dramatic slowdown of the global growth dynamic due to the current financial market turbulence" from the troubles with subprime mortgages in the United States, the jobless rate is expected to remain steady without any major upward swings, he said.

Concern about the U.S. subprime crisis has raised its head in Germany, but the possibility it could halt Germany's growth outright has been dismissed.

"The assumption is that there will be growth, but it will slow by about 0.2 percentage point," Economics Minister Michael Glos said Tuesday.