Further Signs Of Strength In German Economy

Unemployment rate down,  growth forecast up in Europe's largest economy.

BERLIN (AP) - Germany's job market brightened in January, while the government on Wednesday raised its growth forecast for this year - both signs of the ongoing recovery in Europe's largest economy.

The unemployment rate for January, adjusted for the drop in seasonal work such as construction, fell to 9.5 percent from 9.8 percent the previous month, with the number of jobless dropping by 106,000 persons.

That contrasted with the seasonally unadjusted rate, which jumped to 10.2 percent in January from 9.6 percent in December, as some 239,000 more people were out of work.

Meanwhile, the Economy Ministry raised its forecast for economic growth this year to 1.7 percent from 1.4 percent, and predicted the number of unemployed would fall 480,000 this year.

''The strong economy muted the seasonal rise in unemployment in January,'' the head of the Federal Labor Agency, Frank-Juergen Weise said. ''The growth in employment is broadening and the demand for labor by companies remains stable at a high level.''

Labor officials cited the lower adjusted figure as another sign of strength in the economy, which grew 2.5 percent last year. The recovery began with stronger exports but has since broadened to include more consumer demand and investment spending by companies on new plants and equipment.

''It is particularly heartening that, alongside the impetus from foreign trade, the domestic economy increasingly is providing positive contributions to growth,'' the Economy Ministry said in a statement.

Franz Muentefering, deputy prime minister and labor minister in Chancellor Angela Merkel's coalition Cabinet, said the figures showed ''a hopeful trend.''

''Whoever has work can hope to keep it and whoever doesn't increasingly has the chance to find work,'' he said.

In seasonally unadjusted terms, a total of 4.247 million people were out of work in January, up from just over 4 million the month before, the Federal Labor Agency said. That was still 764,000 fewer than a year ago.

The unemployment figures underlined the difficulties still faced by former communist East Germany, where the jobless rate was 16.9 percent, compared to 8.4 percent for the western part of the country.

Economists say economic growth in 2007 will be slightly slower than in 2006, in part due to the Jan. 1 increase in value-added tax paid by consumers on most purchases to 19 percent from 16 percent.