By Maria Martinez

BERLIN (Reuters) -The number of people out of work in Germany rose at a faster pace than expected in May, labour office figures showed on Wednesday, putting pressure on a new government battling to wrench Europe's largest economy from a prolonged downturn.

The office said the number of unemployed increased by 34,000 in seasonally adjusted terms to 2.96 million. Analysts polled by Reuters had expected a rise of 10,000.

The number of unemployed people in Germany is approaching the 3 million mark for the first time in a decade.

"The current labour market figures show that we urgently need economic policy impulses that create growth," German Labour Minister Baerbel Bas said.

Economic malaise has put pressure on the job market even against a backdrop of long-term labour shortages, adding to pressure on conservative Chancellor Friedrich Merz, who has vowed to pull the economy out of a two-year decline.

Tariffs announced by U.S. President Donald Trump could deal a major blow to those efforts - possibly putting the German economy on track for a third straight year of recession for the first time in the country's post-war history.

Hiring intentions in the service sector, however, offer a rare bright spot, said Marc Schattenberg, economist at Deutsche Bank.

"Especially if the trade conflict between the U.S. and the EU is resolved soon, the German economy could grow slightly again this year," Schattenberg said. "That would finally give the labour market more tailwind."

The seasonally adjusted employment rate remained unchanged in May from the previous month at 6.3%, in line with a forecast by analysts in a Reuters poll. Excluding the pandemic, this is the highest level since December 2015.

Pantheon Macroeconomics forecasts that the German unemployment rate will climb to closer to 6.5% over the coming months.

"The labour market is not getting the tailwind it needs for a trend reversal. Therefore, we expect unemployment figures to continue to rise in the summer," said labour office head Andrea Nahles.

There were 634,000 job openings in May, or 67,000 fewer than a year ago, showing a slowdown in labour demand, the labour office said.

(Reporting by Maria Martinez and Rachel MoreEditing by Madeline Chambers and Joe Bavier)