German unemployment slips lower, gov't says

The unemployment rate was 7.6 percent, down 0.1 percent from July, when unemployment edged higher for the first time in months, the agency said. It said that the number of people without work in August fell by 14,000 to a total of 3.19 million unemployed on a seasonally unadjusted basis.

The decline is part of a larger drop in Germany's unemployment rate, which fell below 8 percent in May for the first time since 1992. The last time the rate was below 7.6 percent was in May 1992, the agency said.

"The latest surprisingly strong decline in unemployment is good--and highly welcomed--news after a wave of shocking indicators," said Andreas Rees, chief German economist with UniCredit in Munich, referring to recent reports that showed precipitous declines in consumer and business attitudes toward investment and spending.

German growth shrank for the first time in nearly four years in the second quarter.

But Rees said that it may just be a matter of time before the high euro, shrinking growth and global economic slowdown makes it presence felt among German employers.

"Please keep in mind that unemployment is a typical lagging indicator. It will therefore take some time before the economic slowdown will really leave its mark," he said.

Timo Klein, analyst with Global Insight in Frankfurt, disagreed.

"The adjusted unemployment rate has dropped from 8.9 percent to 7.6 percent over the past 12 months," he said in a research note. "Global Insight expects unemployment to fall modestly further during the latter months of 2008 and possibly even in early 2009, despite the dampening influence from the slowdown in economic growth."