German unemployment unexpectedly rose in January, while industrial orders increased twice as much as expected in December in a sign that a recovery in Europe's biggest economy is not yet strong enough to spur hiring.
Germany's jobless total rose a seasonally-adjusted 28,000 under the conventional calculation method comparable with previous months, but fell by 81,000 under a new method introduced this year, the Federal Labour Office said.
Orders, led by a surge in demand from abroad, rose a seasonally-adjusted 1.2 percent "despite the noticeable strengthening of the euro," the Economy Ministry said in a preliminary report. According to Reuters calculations, orders jumped 6.5 percent from December 2002.
"Vacancies continue to decline, which suggests that firms are not yet expanding their hiring plans," said Sandra Petcov, an economist at Lehman Brothers in London.
"That is not unusual: in the early stages of a cyclical recovery, firms can typically raise output by using their existing workforce more fully or by getting them to work harder rather than hiring new workers," she added.
The Labour Office has changed its definition of unemployment to exclude more than 80,000 people on training programmes from the jobless rolls.
Economists polled by Reuters had expected the adjusted jobless total to fall by 20,000 from December, but the statistical change confused matters.
The January unemployment data are the first to be published since last month's sacking of Federal Labour Office President Florian Gerster after a row over the award of consultancy contracts. No decision has been taken on a successor yet.
The ousting of Gerster was a blow to Chancellor Gerhard Schroeder, who tapped him to overhaul the Office, a key plank of the government's reform agenda.
Germany's economic recovery has yet to feed through to the labour market as companies are reluctant to expand their workforce until the upswing gathers momentum, economists said.
A report last month showing a 2.3 percent drop in December retail sales suggests domestic demand remains limp.
"We can only expect a noticeable improvement in the labour market when the economy grows significantly for a long period," Heinrich Alt, a member of the Labour Office's management board, told a news conference in Nuremberg.
Some firms are still shedding workers to cut costs. Drug-maker Schering AG said on Thursday it planned to cut 350 more jobs in Germany over the next three years.
A separate report from the Federal Statistics Office on Thursday showed that the number of Germans in work fell by 4,000 in November to 38.208 million.
December's gain in industrial orders was led by a surge in demand from abroad which outweighed the impact of the strong euro, the report showed.
The monthly gain beat a consensus forecast of economists of an increase of 0.6 percent.
"In general, the positive news is that the strong euro has not translated into a dampening effect on the economy, contrary to what had been feared," said Thorsten Polleit, an economist at Barclays Capital.
"It looks like we're still on an upward trend as far as orders and production are concerned," he added. European policy makers have warned that the common currency's appreciation could hurt exporters in the 12-nation euro zone and snuff out an economic recovery.
Analysts expect a government report on Friday will show a 0.25 percent month-on-month decline in industrial production in December. From the same month a year earlier, output probably rose by 3.5 percent, they predicted.
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