Hiring Now

The Nuremberg-based Federal Labor Agency said that the number of jobless dropped by 37,000 in seasonally adjusted terms to 3.82 million this month with the unemployment rate edging down to 9.1 percent and job vacancies increasing.

Analysts had forecast that seasonally adjusted unemployment would drop by 20,000 from May, when the jobless rate stood at 9.2 per cent.

"The driver is the good economic performance," said Alexander Koch, an economist at the Hypovereinsbank. He added that employers were now complaining of growing labor shortages in key sectors of the economy.

Consumer confidence gaining in strength

Job vacancies rose by 11.6 percent to 648,096, Thursday's data showed as Chancellor Angela Merkel's government considers possible measures which could ease the way for skilled foreign workers to enter the German labor market to fill gaps.

Falling unemployment has also helped to shore up consumer confidence in Germany where stagnating household spending has been a drag on economic growth in recent years.

German consumer confidence is at a six-month high, a survey released this week showed. Predictions of higher wages in the nation are helping to fuel optimism among the nation's consumers, the survey said.

The number of unemployed fell by 26,000 in the economically more important western part of the nation, the labor agency said, and by 11,000 in the nation's former communist east.

Growth could exceed 2.8 percent

Amid signs that the German economy has rebounded unexpectedly strongly from the hefty and unpopular hike in the nation's value-added tax in January and this year's US economic slowdown, economists have been revising upwards their 2007 growth forecasts for Germany.

Many economists now project German economic growth to match or possibly surpass last year's perky 2.8 percent expansion rate.

But with two major economic sentiment surveys -- the ZEW investor confidence report and the ifo business confidence index -- recently pointing down, analysts also say that the nation's economic expansion could be starting to plateau out.

Indeed, Germany's retail traders' association (HDE) said on Thursday it expected 2007 retail sales to fall in real terms after a difficult start to the year.

Pollitically sensitive data

In the meantime, Thursday's jobless figures showed the politically-sensitive unadjusted labor market data also fell in June, dropping by 25,000 from May to 3.687 million in June with the unemployment rate edging down 0.3 percentage points to 8.8 percent.

"The demand for workers has increased again," said Federal Labor Agency chief Frank Jürgen Weise.

The June unadjusted unemployment figures represented a 712,000 decline compared to June 2006, when the jobless rate stood at 10.5 percent.

This represents an average monthly fall of 60,000 over the last 12 months. The fall in seasonally unadjusted or headline unemployment was also more than expected by analysts, who had forecast a month-on-month fall in June of about 75,000.

While the economists see the seasonally adjusted data as pointing to trends in the labor market, the headline data has become more politically significant in Germany.