German unemployment rises less than forecast in February, labour office says

By Rachel More

BERLIN (Reuters) - The number of people out of work in Germany rose in February at a slower rate than expected, data showed on Friday, but the federal labour office warned that economic malaise was still putting pressure on the job market.

The office said the number of people unemployed increased by 5,000, in seasonally adjusted terms, to 2.89 million. Analysts polled by Reuters had expected that figure to rise by 15,000.

The seasonally adjusted job rate remained unchanged from the previous month at 6.2%, in line with a forecast of analysts polled by Reuters.

"The economic weakness remains visible on the labour market in February," said the labour office's Daniel Terzenbach.

Europe's largest economy contracted for the past two years and will stagnate at best in 2025 as its vast manufacturing sector is in recession, households are saving up cash instead of consuming and the government is spending far less than its relatively low debt levels would allow.

Against that backdrop, the number of unemployed people in Germany could surpass the 3 million mark for the first time in 10 years this year.

The conservative CDU/CSU bloc won Sunday's election by a wide margin and chancellor-in-waiting Friedrich Merz said he was keen to form a government quickly to revive the German economy. That will still require him to form a coalition, most likely with outgoing Chancellor Olaf Scholz's Social Democrats (SPD).

On Wednesday, the Ifo economic institute said German companies were planning to reduce their headcounts across sectors, with the most severe job cuts seen in manufacturing, according to a February survey.

"The labour market urgently needs impetus with the right economic policy," said Rainer Dulger, head of the BDA employers' association.

With coalition talks set to get under way on Friday, Dulger called on the country's next government to act by cutting red tape, eliminating disincentives to work in the welfare system and simplifying digital processes for visas to bring in foreign workers.

(Reporting by Rachel More, editing by Kirsti Knolle and Alex Richardson)