German Jobless Decline Unlikely to Drive Up Interest Rates
FRANKFURT -- German Chancellor Helmut Kohl may get plenty of pre-election mileage from May's positive unemployment numbers, but they aren't likely to result in an increase in interest rates by the Bundesbank, analysts said.</br></br>Though the 60,000 decline in May's seasonally adjusted jobless numbers was good news and was evidence that the German economy was gaining steam, it was accompanied by a report that industrial output fell a seasonally adjusted 0.6% in April from March.</br></br>The jobless figures were leaked prior to yesterday's official release. As early as Friday, Mr. Kohl cheered the numbers, saying the unemployment rate declined to 10.9% in May from 11.4% in April.</br></br>Economists, however, dismissed the notion of inflationary dangers and any calls for the German central bank to raise rates pre-emptively at today's policy-setting central bank council. They said the link between employment and inflation in the U.S. doesn't apply in Germany, because the rate of unemployment in the U.S. is much lower than in Germany, and close to its so-called natural rate, where it poses inflationary pressure.</br></br>"The German unemployment numbers don't pose any kind of inflationary danger," said Hans-Joerg Naumer, economist at Societe Generale in Frankfurt. "On the contrary, we'd be happy if the labor force were close to being used to full capacity."