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German unemployment unexpectedly rises as economic risks mount

[BERLIN] German unemployment unexpectedly rose for a second month in July, signaling that uncertainty surrounding Greece and the future of the euro may have damped economic activity.

Joblessness increased a seasonally-adjusted 9,000 to 2.8 million, the Federal Labor Agency in Nuremberg said on Thursday. Economists had predicted a drop of 5,000. June was revised to show a gain of 1,000. Nonetheless, the unemployment rate remained at 6.4 per cent, the lowest level since German reunification.

The labour market's weakness this month could be a first sign that regional spillovers are affecting Europe's economic powerhouse. Even so, business confidence rebounded in July after a euro-area deal granted Greece a third bailout, preventing for now a default or potential exit from the currency union.

"Even if there is a slowdown, probably the recovery in the labor market would not stop," said Andreas Rees, UniCredit Bank AG's chief economist on Germany. "The upward trend in the German economy is intact." The Bundesbank said in its July monthly bulletin that "strong" increases in factory orders during April and May suggest a revival in the economy in coming months.

The jobless rate in the 19-nation euro area probably fell to 11 per cent in June from 11.1 per cent the previous month, according to a separate Bloomberg survey. The European Union's Luxembourg-based statistics office will publish that report on Friday.

BLOOMBERG