UPDATE 1-German jobless rate falls to lowest since 1992

Tue Feb 1, 2011 5:03am EST

* Jan seasonally adj jobless -13,000 vs -10,000 in Rtrs poll

* Jan unemployment rate 7.4 pct vs 7.5 pct in poll

* Fuels hopes of consumer spending boost to economy

(Adds details, background)

BERLIN, Feb 1 (Reuters) - Joblessness in Germany fell more than expected in January to leave the unemployment rate at its lowest level since March 1992, data showed, fuelling hopes that consumer spending will help underpin the country's economic recovery.

"Jobs paying into the social security system and overall employment increased considerably and the demand for workers continued to increase," said Frank-Juergen Weise, the head of the Federal Labour Office said on Tuesday.

Unemployment dropped by a seasonally adjusted 13,000 and the rate to 7.4 percent, the Labour Office data showed. A Reuters poll had forecast a median drop of 10,000, with the unemployment rate staying steady at 7.5 percent and jobless numbers at 3.3 million.

Continued job growth plays a critical element in economists' forecasts for a consumer spending rebound in Germany this year, since recent data suggests already employed households are not confident enough yet to finance more purchases by dipping further into their nest eggs.

Barring a sudden reversal in behaviour, economists expect consumption to rise in line with the number of new entrants into the German workforce.

"January's fall in German unemployment provides hope that a strengthening labour market will prevent household spending from faltering this year in response to Germany's fiscal squeeze," said Ben May, European Economist at Capital Economics.

An unexpected sharp decline in December retail sales -- the fourth such contraction in five months for what is a traditionally volatile indicator -- contradicted sentiment data like a recent GfK monthly consumer survey that hit a high last seen in October 2007. [ID:nLDE70U0EI] [ID:nLDE70N1DK]

(Reporting by Christiaan Hetzner, Additional Reporting by Sarah Marsh; Editing by John Stonestreet)

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