Unemployment Crippling SPD Ahead of Poll

The head of Germany’s Federal Labor Office, Frank-Jürgen Weise, said on Thursday that well over 5.1 million people were registered as unemployed in March. Looking on the bright side, this means that some 41,000 more people had work, compared to February. Weise suggested that the government’s labor market reforms were slowly having an impact on the employment situation, but warned against too much optimism.

"It’s the first time since the restructuring of the employment agencies that unemployment figures went down in absolute numbers," he said. "This in itself is an achievement, as we had expected the number of jobless people to rise further in March because of a changed statistical approach."

Economics Minister Wolfgang Clement argued that the drop in unemployment would have been much more tangible had the winter not lasted as long as it did, preventing some industries from hiring additional seasonal workers.

"The tide is turning," he told reporters in Berlin. "We are convinced that we will return under the five million mark in the spring and we will never reach this level again in the future."

Post-war highs

Since coming to power in 1998, Schröder and his centre-left government have been unable rein in unemployment, which has since then risen from more than four million to its current post-World War II record highs.

Following a string of successive state election defeats, Schröder's Social Democrats (SPD) are now facing a massive test at the ballot box on May 22, when the country's most populous state, North Rhine-Westphalia, goes to the polls.

Some experts are sceptical that any real improvement is likely in the next few years, let alone in the weeks ahead of the state poll, where failure would bode ill for the general election next year.

"Even if growth were to resume over the next few years, Germany would have problems bringing unemployment down below the four million mark on average," said Thomas Straubhaar, from the HWWA institute in Hamburg.

Holger Fahrinkrug at UBS said the new unemployment data could have not only political repercussions in North Rhine-Westphalia but a deeper psychological impact on the economy.

"Consumer confidence is already adversely affected .... Business confidence may also be affected as demand could suffer from precautionary saving in reaction to this," he said.