* IAB says joblessness to fall, albeit at slower pace
* Says positive impact of labour reforms is weakening
* Urges not just more, but better, well-paid jobs
By Sarah Marsh
BERLIN, March 22 German unemployment will fall
for the third consecutive year in 2012 and the number of jobs
will reach a fresh record high since reunification, the Federal
Labour Office's research institute IAB said on Thursday.
But the pace of decline in the number of jobless will ease
as the impact of past labour reforms designed to increase labour
flexibility gradually subsides, and the IAB urged employers to
create more well-paid jobs to help boost domestic demand.
"The labour market remains robust but cannot continue its
steep upward trend," the IAB said in a report.
"We do not expect the economic weakness seen over the winter
to have a serious impact on the labour market. Companies will
have frequently kept workers, given already improving
German unemployment held steady in February despite harsh
winter weather, again resisting the labour market difficulties
seen elsewhere in the euro zone, data showed last month.
"For 2012 we forecast unemployment to fall by 130,000 to
2.84 million," the IAB said, adding that the jobless rate would
fall to 6.8 percent from 7.1 percent in 2011.
This is less than last year's drop of 260,000 as the impact
of former chancellor Gerhard Schroeder's labour reforms weakens
and economic growth slows.
The IAB forecast Europe's largest economy would grow just
1.1 percent in 2012 after expanding 3 percent in 2011.
Germany's export-driven economy recovered quickly from the
2008/09 financial crisis but shrank by 0.2 percent at the end of
last year as the euro zone's debt troubles and a global slowdown
took a toll on exports and private consumption.
Many economists expect output to remain stable in the first
three months of 2012, thereby avoiding the two successive
quarters of contraction that define a recession.
So far a solid job market has helped prop up consumer
spending and consumer and business sentiment surveys are upbeat,
while some institutes such as RWI have recently hiked their full
year growth forecasts.
The IAB forecast a further rise in the numbers of people
from countries mired in the euro zone debt crisis coming to
Germany in the search for jobs.
This, along with a greater participation of older people in
the workforce, will fuel a rise in the potential labour force by
40,000 people to a near record high of 44.95 million, it said.
The IAB said the number of people in jobs in Germany would
rise by 450,000 on average to around 41.55 million, a fresh
record since reunification in 1990.
The institute said the number of jobs subject to social
insurance contributions would rise faster than other employment,
which is positive news for Finance Minister Wolfgang Schaeuble
whose budget plans are based on strong tax revenues.
However, it also noted that reforms promoting labour market
flexibility had led to a "revolving door effect" in some sectors
in recent years, with workers unable to find steady jobs, and
urged employers to create more secure, long-term jobs.
"The positive trend in employment in the past few years was
brought about to a great extent by wage moderation and labour
market reforms," the IAB wrote.
"We should not focus on continuing these mechanisms to
achieve more improvement on the labour market however. Real
wages should rise more strongly once again, as we have seen
"The development of employment and income will play an
important role strengthening domestic demand," the IAB said.
Years of restrained pay growth has boosted Germany's
competitiveness and helped to cut its unemployment rate to a
two-decade low. Many economists expect bigger wage increases in
2012 than last year and say they may outpace inflation.
Wage rises in many other euro zone countries have been
steeper than in Germany in recent years, stoking the economic
divergence which has underpinned the debt crisis in the single
Overall, wages for some 9 million workers are up for
negotiation in Germany this year. Verdi and IG Metall unions are
both asking for 6.5 percent wage rises for some five million
workers in total.
(Reporting By Sarah Marsh, editing by Gareth Jones)