MercoPress. South Atlantic News Agency

Unemployment in Germany rose in July and worse to come

The Euro-zone unemployment also hit the highest in ten years in June, 9.4%

Unemployment in Germany rose in July, official figures have shown, and economists have warned that the worst still lies ahead for the job market.

The number of people out of work rose by 30,000 in July to more than 3.5 million on a seasonally adjusted basis. The jobless rate remained at 8.3%.

But taking into account one-off effects, unemployment fell by 6,000, the Federal Labour Office said. Some analysts predict unemployment will approach 4.5 million next year.

Experts say a government scheme subsidising firms to cut working hours instead of making mass redundancies has so far helped to prevent a steep rise in unemployment. But some fear the effect will be short-lived.

“We expect adjusted unemployment to still rise heavily towards 4.5 million by mid-next year,” said Alexander Koch from Unicredit, noting that most workers on the government's short-term work hour scheme were likely to eventually end up out of work.

Earlier in the week the Euro-stat office reported that unemployment in the Euro-zone hit 9.4% in June, the highest in 10 years and another sign of the economic slowdown. The number of jobless grew by 158,000 during the month, taking the total number of unemployed in the area using the Euro to 14.9 million.

The figures came as separate data showed that inflation had declined more than expected in the 16 Euro-zone countries in July.

Consumer prices in the 16-nation area fell a record 0.6% compared to a year earlier, according to Eurostat. It was the second month in a row of falling prices following June's decline of 0.1%.

As consumers lose their jobs and tighten their belts, this leads to lower spending. To attract customers, retailers have been cutting prices further.

The European Central Bank predicts that consumer prices will decline for a few months due to the comparison with record high oil and food costs a year earlier.

Euro-stat has calculated that 3.17 million people living in the Euro-zone have become unemployed since June 2008, when the unemployment rate was 7.5%.

Spain was particularly badly hit with unemployment up 18.1% in June, and a youth unemployment rate of 36.5%. At the other end Netherlands has the lowest unemployment, 3.3% and similarly with youth joblessness, 6.3%.