May 31, 2016 / 8:06 AM / a year ago

German unemployment rate falls to record low in May

BERLIN (Reuters) - German unemployment fell more than expected in May and the jobless rate sank to its lowest level in more than 25 years, boosting expectations that private consumption will continue to drive growth in Europe's biggest economy this year.

The seasonally adjusted jobless total fell by 11,000 to 2.695 million, the Labour Office said, more than double the Reuters consensus forecast for a fall of 5,000.

"The labour market continues its overall positive development," Frank-Juergen Weise, head of the Federal Labour Office, said in a statement. "Unemployment fell in the course of spring. Employment rose sharply and the demand for labour also increased significantly."

The adjusted unemployment rate fell to 6.1 percent, its lowest level since German reunification in 1990. The rate had held at 6.2 percent for four consecutive months.

Separate data from the Federal Statistics Office showed that seasonally adjusted employment, as measured by the International Labour Organisation, rose by 41,000 to more than 43.4 million in April.

The government expects employment to reach a record 43.5 million this year and nearly 44 million in 2017. That should further propel domestic demand and push up tax revenue, enabling the government to increase state spending.

The German economy expanded by 1.7 percent in 2015, its strongest rate in four years, mainly driven by robust private consumption and higher state spending on refugees. It is expected to grow by around the same amount this year.

"The economic impulse is perfectly timed and should dampen labour market worries caused by high immigration and the minimum wage," said KfW bank economist Joerg Zeuner.

More than one million migrants arrived in Germany last year, raising fears that unemployment would rise as it is hard to integrate them into the labour market.

Those fears were compounded by Germany's introduction last year of the first nationwide wage floor of 8.50 euros per hour, which critics said would discourage employers to hire.

Additional reporting by Paul Carrel and Madeline Chambers; Editing by Raissa Kasolowsky

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