German unemployment rose by 56,000 on the month in January, its third straight rise and biggest increase in nearly four years, in a sign that Europe's largest economy is in deep recession with an election looming.
The seasonally adjusted rise surpassed the consensus forecast for an increase of 30,000 on the month in a Reuters poll of 37 economists. It marked the biggest gain since March 2005, when the jobless total surged above 5 million to a post-war high.
"In coming months we must expect a further significant rise in unemployment figures. At the end of the year we could have half a million more jobless," said Juergen Michels at Citigroup.
The increase reported by the Federal Labour Office confirmed a figure earlier obtained by Reuters. The euro had slipped after a Labour Office spokesman said the consensus forecast was over-optimistic.
The rise took the adjusted jobless total to 3.267 million, giving an unemployment rate of 7.8 percent, the Office data showed. The headline unadjusted jobless total rose by 387,000 to 3.489 million.
"The economic downturn is now hitting the labour market. The three most important labour market indicators are showing negative development: unemployment has risen, full-benefits paying jobs have declined and readiness to hire is sinking strongly," Labour Office chief Frank-Juergen Weise said.
The German jobless rise poses risks to Chancellor Angela Merkel's conservatives and her coalition partners, the Social Democrats, who will contest a federal election in September.
A sharp rise in joblessness four years ago, partly linked to the introduction of labour market reforms, hit support for Merkel's Social Democrat predecessor Gerhard Schroeder and forced him to call early elections.
A revision to previous data made January's increase the third month in a row that the unemployment total has risen.
The coalition had presided over a steady fall in unemployment since the last election in 2005, but the foreign demand that has fuelled export-driven growth in the German economy since then is fading fast.
German companies are slashing jobs in response to a deep recession, which is sapping demand for their goods and services.
Retailer Metro AG said last week it planned to cut about 15,000 jobs by 2012 as part of a restructuring programme.
ThyssenKrupp's chief executive Ekkehard Schulz said last week he would not rule out further output cuts at the steelmaker, shortened work hours and job cuts, due to uncertainty about how deep the recession would be and how long it would last.
"I have never seen, in my more than 40 years of experience, such a sharp slump as we have seen in the past months," said Schulz. ThyssenKrupp is Germany's biggest steel maker.
