Unemployment in Germany last month recorded its biggest monthly drop since the country's reunification 17 years ago, underscoring the robustness of the rebound in Europe's largest economy.
Seasonally adjusted figures released by the Federal Labour Agency put the number of jobseekers at 4.1 million in December, down 108,000 on the month, a far bigger drop than economists had expected.
The agency also restated its November figures, showing a fall of 94,000 instead of 86,000.
"This was such a dramatic drop," said Dirk Schumacher, economist at Goldman Sachs, "that we first wondered whether there was a mistake in the figures."
Goldman had expected the number of jobseekers to fall by 15,000. This "extraordinary decrease in unemployment", as the agency described it, put the jobless rate at 9.8 per cent. The latest internationally comparable figures from the International Labour Organisation showed a 7 per cent rate for Germany in November.
"These figures are considerably better than expected and underpin the view that the recovery in Germany has become sustainable," said Elga Bartsch, economist at Morgan Stanley.
The data, following upbeat business sentiment surveys at the end of December, will buttress the view shared by most economists that the strong recovery will last well into 2007, despite a three-point rise in VAT this month, the biggest tax increase in postwar German history.
The Ifo business sentiment index surged to a 16-year high last month after notching up the fastest growth in 2006 since the start of the decade.
The German DIW economic institute yesterday raised its gross domestic product growth forecast to 1.7 per cent in 2007 and 2.5 per cent in 2008.
"With the economy displaying such widespread strength, the Vat hike may prove to be little more than an ineffective speed bump," Mr Schumacher said.
The Labour Agency attributed the positive figures mainly to "the cyclical rebound in job creation", but economists said several factors, including mild weather in December and benefits available to laid-off construction workers as of December 1st, might have marginally flattered the data.
In November, the latest month for which data were available, 46,000 jobs were created, bringing the total number created in the past year close to 500,000.
While trade unions have called for higher wage settlements this year, the strength of the recovery has triggered a debate within the government about the need for fresh structural reforms.
