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German Unemployment Rises as Weaker Economy Starts to Bite

Unemployment in the country unexpectedly rose for the first time in almost two years.

German Unemployment Rises as Weaker Economy Starts to Bite
Visitors look at employment opportunities displayed on a job board at the Connecticum job fair at Tempelhof airport in Berlin, Germany. (Photographer: Krisztian Bocsi/Bloomberg)

(Bloomberg) --

German unemployment unexpectedly rose for the first time in almost two years as the economic slowdown finally started to take a toll on the labor market.

The number of people out of work climbed by 60,000 in May, compared with economists’ forecasts for a decline of 8,000. The jobless rate also rose, to 5% from a record-low 4.9%.

German Unemployment Rises as Weaker Economy Starts to Bite

The Federal Labor Agency said about two-thirds of the increase was due to reclassification of some people in the statistics, though it also cited the slowdown in Europe’s largest economy.

“We are seeing the first signs of a weakening economy on unemployment,” it said on Wednesday. It added that demand for new employees is still at a high level, but is softening.

German 10-year bunds rose for a third day, pushing yields further below zero, to minus 0.167%.

Strength in Germany’s labor market has helped to boost consumer spending and support the economy. A turnaround in fortunes could be very damaging, given ongoing weakness in manufacturing and the auto industry, as well as trade tensions that threaten to hit exports. Business confidence plunged this month to the weakest in more than four years.

A deeper slowdown in Germany would also have ramifications for the broader euro region. The European Central Bank meets on June 6 to update its economic projections for the currency bloc and debate whether it needs more stimulus.

--With assistance from Kristian Siedenburg.

To contact the reporters on this story: Paul Gordon in Frankfurt at pgordon6@bloomberg.net;Oliver Sachgau in Munich at osachgau@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Fergal O'Brien, Catherine Bosley

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