German unemployment sees seasonal rise in January

BERLIN (AP) - Germany's unemployment rate increased to 7.4 percent in January as the country was hit by harsh winter weather, but seasonally adjusted jobless figures dropped unexpectedly and analysts said Thursday that the job market in Europe's biggest economy remains solid.

The number of Germans registered as unemployed stood at 3.14 million, 298,000 higher than in December and 54,000 more than a year earlier, the Federal Labor Agency said.

The head of the agency, Frank-Juergen Weise, said the increase was down to 'purely seasonal reasons.' Harsh weather typically weighs on industries such as construction in winter.

Adjusted for seasonal factors, the jobless rate slipped to 6.8 percent from 6.9 percent, where it had stood for three months. The number of people out of work was down 16,000 from December - compared with economists' expectations that it would rise by 8,000.

'Today's numbers confirm that the German job miracle has lost some of its magic,' said Carsten Brzeski, an economist at ING in Brussels. 'However, even without being miraculous, the labor market should remain growth-supportive.'

The solid employment report underlines rising hopes that the German economy will quickly recover from a weak patch and benefit from an easing in Europe's financial turmoil.

The German economy grew a modest 0.7 percent last year, and officials estimate it shrank by as much as 0.5 percent in the fourth quarter compared with the previous three-month period. But the central bank says improving hopes for the country's export performance, combined with a stable labor market, point to a pick-up in the economy.

Timo Klein, an economist at IHS Global Insight in Frankfurt, said the debt crisis in the 17 European Union countries that use the euro remains 'important as a risk factor' but 'should not be much of a burden in the next several months at least.'

Retail sales figures released Thursday were less satisfying, however. The Federal Statistical Office reported that, adjusted for inflation, sales were down 0.3 percent in 2012 compared with the previous year. In December, sales were 1.7 percent lower than the previous month.