German joblessness rises for seventh month running

BERLIN (Reuters) - German joblessness rose for a seventh month in a row in October, highlighting the vulnerability of Europe's biggest economy to the euro zone crisis, but economists expect the trend to reverse as growth revives in the new year.

Labour Office data showed on Tuesday the number of people out of a job rose to 2.937 million in October, up 20,000 from the previous month. The consensus forecast in a Reuters poll of 31 economists was for unemployment to rise by 10,000..

The unemployment rate stood at 6.9 percent, unchanged from a revised figure for September.

"The weaker economic situation is having a noticeable impact on the labour market. However, the labour market overall is proving robust and is in good shape," said Frank-Juergen Weise, head of the Labour Office.

The continued weakness of the labour market has upset hopes that domestic demand could offset the impact of weakening exports and cushion the effects of Germany's economic slowdown.

Economists noted that more companies, especially in the car industry, had reintroduced short-time working and that this would have a further negative impact on joblessness in the key engineering sector.

But they said the recent calming of investor sentiment over the euro zone crisis should help Germany's economy to regain some momentum in coming months and this would start to show up in the jobless figures.

"In the coming months, labour market data will probably be rather weak. Things can only improve once the relative calm currently experienced by financial markets is transferred to the real economy," said Christian Schulz of Berenberg Bank.

"That will probably be at the start of next year, when the economy is growing again. That will then have a delayed effect on the labour market," he added.

(Writing by Gareth Jones)