Spring in the Air for Germany as Jobless Total Falls

The jobless data, combined with separate statistics showing a strong rise in retail sales in April, suggested that the long-awaited economic recovery in Germany has finally become

self-sustaining, analysts said.

In unadjusted terms, the German jobless total fell by 255,000 to 4.535 million in May, bringing the jobless rate down to 10.8 percent from 11.5 percent, the Federal Labor Agency in Nuremberg calculated.

Unemployment usually improves in the spring months as the warmer weather allows companies in sectors such as the construction industry to hire more people.

But even taking such factors into account, there was an improvement in the German labor market this month.

Adjusted data also positive

Seasonally adjusted data published separately by the Bundesbank showed a surprisingly sharp decline in the German jobless total of around 93,000 to 4.596 million in May. The adjusted jobless rate was down at 11.0 percent from 11.3 percent, the German central bank said.

The government hailed the jobless statistics, saying it was the sharpest decline in unemployment in years.

"The German economy is growing," said Labor Minister Franz Müntefering.

Analysts were also pleased by the jobless data.

"It's more than usual spring pick-up," said Postbank economist Fabienne Riefer.

The fledgling economic recovery "is gradually feeding through into the labor market," she said. "And the positive signals are likely to continue in the coming months" as recovery gathers breadth and momentum, she added.

Bank of America economist Holger Schmieding agreed.

"Two cheers for the German economy," he said. "After a surge in business confidence to a 15-year high and a nice updrift in long-depressed consumer confidence, the hard data are now following suit."

The widely watched Ifo business climate index is currently close to its highest level in 15 years and the GfK market research institute found earlier this week that consumer confidence is continuing to improve.

Germans spending more

Retail sales in Germany soared by 2.8 percent in April, data published by the federal statistics office, Destatis, showed on Wednesday.

"While German companies are firing fewer people, consumers are starting to open their wallets again. Germany's upswing, as that of the eurozone as a whole, has finally become self-sustaining," Schmieding said.

Schmieding said the strong jobless and retail sales data "strengthen the case for an accelerated pace of interest rate hikes by the European Central Bank and thus for a half-point rise in rates next week."

But UBS economist Edward Teather was more cautious, predicting only a quarter-point move when the ECB's policy-setting governing council meets in Madrid on June 8.