Big Leap in Jobless further Blow for Schröder

In signs that the eurozone’s largest labour market is still suffering the effects of last year’s global slowdown, the May unemployment figures came despite recent business surveys suggesting greater investor confidence and economists’ expectations of a gradual improvement.

Florian Gerster, head of the Federal Labour Office said that he expected no significant upturn in jobs until the final quarter of this year. He said a wage dispute in the construction sector ad holidays had contributed to May’s sharp rise.

That translates into bad news for German Chancellor Gerhard Schröder’s Social Democratic Party (SPD), which faces general elections in September. The SPD hopes to be reelected largely on the basis of an expected economic recovery and lower unemployment.

Opinion polls show that the SPD is trailing five percentage points between the opposition Christian Democrats and Christian Social Union.

The adjusted jobless total, which takes into account the effects of weather and seasonal hiring and the figure closely watched by financial markets, rose to 4.042 million from 3.893 million in April, much more than expected by analysts.

The seasonally unadjusted figure, the number politicians usually focus on, fell below the four million level for the first time this year, dropping 78,000 to 3.946 million.

But the drop in the unadjusted data is still significantly less than a fall of 100,000 that Labour Minister Walter Riester had predicted last month.

Riester said that Schröder’s centre-left government had created all the right conditions for job creation, including tax breaks for low earners and programmes for the long-term unemployed and the jobless in the still economically depressed former Communist east.

"All lights are on green for labour market policy," he said.

Government spokesman Uwe-Karsten Heye told a news conference that while it was clear a tentative recovery was not yet helping the labour market, better-than-expected April data released on Thursday gave cause for optimism.

Data released on Thursday showed German manufacturing orders surged 2.3 percent in April, exceeding the optimistic forecast for a 1.5 percent increase. Chancellor Schröder said the data was a sign of the upturn in Europe’s biggest economy.