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. Last Updated: 07/27/2016

German Unemployment Up

NUREMBERG, Germany -- German unemployment jumped in February to a postwar record of 3.9 million, the Federal Labor Office said Wednesday.

That was up from 3.8 million in January, which was the sixth consecutive monthly rise. January was itself a record.

The Bundesbank said the seasonally adjusted unemployment rate rose to 10.3 percent in February from 10.1 percent.

Economics Minister Guenter Rexrodt said the high level of unemployment was an unbearable burden, but that the economy was not headed into a recession.

Growth forces would regain the upper hand in the course of the year, easing labor market tensions, though that alone would not be enough to improve the fundamental labor situation, he said.

Federal Labor Office president Bernhard Jagoda said abnormally cold weather was largely to blame for the sharp rise of 107,000 in the adjusted total, hitting especially hard in the construction industry, already weakened by sluggish orders.

"The extremely cold and long winter has -- alongside a consistently weak economy -- had a major impact," he told reporters.

The weak German job market fueled gains in the dollar and in German bunds, on expectations the news would lead to lower German interest rates.

Economist Joachim Fels at Goldman Sachs in Frankfurt said Germany was now paying the price for the high wage rises agreed upon last spring.

"Things are becoming progressively worse. This raises pressure on the Bundesbank to cut interest rates," Fels said.

The central bank would not want to be seen to be reacting to labor market figures but it would have to do something and hope it leads to a lower mark, he said.

Rexrodt said reasonable wage demands and lower taxes and withholdings were needed.

He said he expected seasonal factors to improve labor market conditions in coming months.

Jagoda said, "We of course expect an improvement in the monthly figures, but we still have structural problems."

Hanspeter Leikeb, acting director of the Institute for Labor Market Research, said moderation in wage demands was needed, and government-private sector initiatives must be put into practice despite the need for austerity.

"The Alliance for Jobs must earn its name, and wage bargainers must correct the 1995 wage round in 1996. There is not much to share around. The state must not save itself to death. That could lead to a crisis," Leikeb said.

Asked whether fiscal austerity to meet the Maastricht criteria for European monetary union could aggravate unemployment, Jagoda said, "I am convinced that the path to Europe is right. But we must push our own economy to create growth so that we can reach the Maastricht goals in 1997."