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. Last Updated: 07/27/2016

German Unemployment Rises to 9.4%

NUREMBERG, Germany -- Germany's Labor Office chief warned Tuesday that unemployment in Europe's largest economy would overshoot earlier forecasts and pleaded for more state funds as the jobless total resumed its rise in September.

German seasonally adjusted unemployment rose by 20,000 to 3.882 million, or 9.4 percent of the working population, confirming earlier leaked figures and in line with economists' forecasts, the Labor Office said Tuesday.

Meanwhile, industrial output rose a higher-than-expected 2 percent in August, although the Finance Ministry warned the month-on-month change may have been distorted by the fact that there were more holidays than usual in July.

The head of the Federal Labor Office, Bernhard Jagoda, said the economic slowdown was dragging on the labor market, particularly in western Germany, where the seasonally adjusted jobless total rose by 13,000 and the unemployment rate crept up to 7.5 percent.

On an unadjusted basis, unemployment in western Germany at 2.422 million was higher than the year-ago figure for the first time since December 1997, Jagoda said.

"Without doubt, the world economic climate has been dampened further by the terror attacks in the United States. With them, the risks to the economy and labor market have grown," Jagoda said, although he added that the September attacks had not yet had a major impact on German unemployment. Jagoda said his Labor Office now assumed that the average number of unemployed in Germany this year would be around 3.85 million. A month ago, he had simply said the Labor Office's 3.7 million forecast seemed overly optimistic.

The September numbers, after no change in August, indicated a recovery of the labor market remains several months away, analysts said.

"The autumn upswing has not happened. This is a bad sign, one that confirms the labor market is depressed. ... We don't expect a recovery this year. In fact, we're pessimistic for the next three quarters," said Uwe Angenendt, chief economist at BHF Bank in Frankfurt.

The euro changed little against the dollar with strikes on Afghanistan more of a focus than the German numbers.

Data from the Finance Ministry showing the surprise August increase in German industrial output also failed to impress. The figures were distorted by holiday effects, so the rise was in part a technical correction from very weak July figures.

Some said the figures suggested the third quarter would not sink into negative growth. Others branded the numbers as old.

"Everything has changed because of the Sept. 11 attacks. The recovery that we saw starting at the end of the third and beginning of the fourth quarters will clearly have been pushed back," said Valentina Stadler, an economist at HypoVereinsbank in Munich.

Jagoda said the labor market -- and therefore spending on unemployment benefits -- had developed worse than expected, and so the Labor Office's financial needs had risen beyond those envisaged by the government in October 2000.

Job vacancies fell by 21,525 to 486,153, the drop-off almost exclusively in the western states.