German unemployment edges up; surge feared

The data showed the lagging effects of the economic crisis on Europe's biggest economy, despite figures on Tuesday pointing to a rise in retail spending.

The Federal Labour Agency said the number of people unemployed rose by 9,000 people from July to a total of 3.47 million on an unadjusted basis, with a government scheme to subsidise shorter working hours “stabilising the labour market.”

Labour Minister Olaf Scholz said in Der Spiegel magazine on Monday that unemployment would rise further in the coming months, but remain below four million.

“The economic collapse will of course lead to a jump in unemployment in the coming months,” Scholz said, before adding that “this year we will stay under the four million mark.”

A state scheme subsidising firms to cut working hours has held down a flood of jobless claims but experts warn that a steady trickle in recent months could soon become a deluge as the plans expired.

“The strength of the labour market will put to the test in the coming weeks when the first wave of short-time work arrangements will reach their 'sell-by date',” ING senior economist Carsten Brzeski said.

Capital Economics economist Jennifer McKeown noted that “the government subsidy, which encourages firms to retain workers for shorter hours, runs out after a maximum of two years.

“We fear that sharper increases in unemployment are to come in future,” she said.

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