German unemployment falls but demand for labor slows

BERLIN (Reuters) - German unemployment fell in February but demand for labor is slowing and focused on services as the economy enjoys "moderate economic growth", the Federal Labour Office said on Tuesday.

Seasonally adjusted unemployment fell by 10,000 to 2.723 million, the Labour Office said, in line with the mid-range forecast in a Reuters poll of economists. The unemployment rate remained unchanged at 6.2 percent, the post-reunification low.

"After the spirited growth in recent months, the demand for labor is now developing more moderately," the Labour Office said in a statement. "But it is still at a very high level."

Growth in employment was focused in services, the office said, another sign the German economy is relying more on domestic consumption than on exports to drive growth.

Underlining the slowdown in the industrial export engine, German manufacturing hardly grew in February, a survey showed on Tuesday. Activing fell to its lowest in 15 months.

Last week, the Ifo business climate survey showed sentiment among German manufacturers plunged the most since the bankruptcy of Lehman Brothers in 2008, deepening concerns about the health of Europe's largest economy.

ING economist Carsten Brzeski said a drop in employment expectations in manufacturing showed that industry is facing external obstacles, but he added:

"As long as this weakness is balanced by strong activity in the service sector, where recruitment plans are still positive and close to all-time highs, there is no need to get overly concerned."

(Writing by Paul Carrel; Editing by Madeline Chambers, Larry King)

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