German unemployment dropped modestly in June, official figures showed Thursday, in the latest sign that the country's impressive labor market momentum is slowing in the face of widespread problems across the 17-country eurozone, according to AP. The unemployment rate fell to 6.6 percent in June from 6.7 percent in May, as the number of Germans out of work fell by 46,000 to 2.8 million. "The German labor market in June is showing signs of weaker development," said Federal Labor Agency head Frank-Juergen Weise. He noted that the unemployment rate usually drops more sharply in June because of an increase in seasonal work. Though the overall unemployment rate is at its lowest level it has been since December, the decrease was the weakest June drop since 2002, according to ING economist Carsten Brzeski. In seasonally adjusted terms the unemployment rate was unchanged at 6.8 percent, and the number of people out of work edged up by 7,000 on the previous month. Germany's economy has grown by 3 percent or more in each of the last two years, and posted unexpectedly high quarterly growth of 0.5 percent in this year's first quarter after contracting in the last three months of 2011. With exports to slumping eurozone nations decreasing, however, Germany has begun pinning more hopes for economic growth on domestic demand and the tepid unemployment figures are a bad sign, Brzeski said. "With employment and hours of work close to record highs, dropping inflation and wage increases, the labor market should continue to be a, if not 'the,' crucial driver of domestic demand this year," he said. "However, this positive impact from the labor market should peter out towards the end of the year." Still, IHS Insight economist Timo Klein noted that the adjusted rate is still at its lowest level in post-reunification history, and that overall labor market conditions are healthier in Germany than in most other European countries. While German unemployment has been consistently low recently, jobless rates have risen to more than 20 percent in Spain and Greece. Barring a major collapse in financial markets, Klein said that after likely increases in unemployment for the remainder of 2012, it should decrease again during 2013. "Employment should continue to increase, reflecting the ongoing increase in the labor force - not least due to migration from troubled eurozone countries," he said in a research note. "The main risks continue to be those related to the eurozone debt crisis and associated banking sector concerns. "
