German unemployment fell by 98,300 to 4.608 million in March, the highest recorded level for the month since 1998, according to figures released by the Federal Labor Office on Thursday. More than 450,000 more people were out of work than the same month last year.

Labor Office head Florian Gerster said the war in Iraq had hampered the usual spring improvement in the job market as the jobless rate dipped just 0.2 percent from 11.3 percent in February to 11.1 percent in March.

“Economic stagnation and geopolitical uncertainty are no basis for a recovery,” Gerster told a press conference.

Unemployment data adjusted for seasonal factors actually rose by 52,000 in March to 4.414 million and the unemployment rate increased to 10.6 percent from 10.5 percent a month ago. Economists often put more stock in seasonally-adjusted figures because they smooth out the sharp changes due to weather and holidays.

The continuing woes of Europe’s largest economy are likely to increase pressure on German Chancellor Gerhard Schröder to push through painful reforms to trim the welfare state and loosen labor market regulation. The controversial plan aims to cap unemployment benefits at 12 months and make it easier for small firms to hire and fire new workers.

Economy slows

In recent years, Germany’s economy has ground to a halt under the crushing weight of its generous welfare system and constricting job protection policies. Economic growth slowed to only 0.2 percent in 2002, its lowest annual rate since a recession in 1993.

“The situation remains very serious, there is no relief in sight,” said German Economy Minister Wolfgang Clement on Thursday. “Therefore it is now more important than ever to implement the reforms that Chancellor Schröder has announced.”

The conservative opposition said the latest data showed the government had failed in its attempt to cut Germany’s chronically high unemployment.

“The chancellor who once wanted to be judged on fighting unemployment now can’t manage anything except record high levels,” said Christian Democrats General Secretary Laurenz Meyer. “The problems are self-made,”

The difference in joblessness between eastern and western Germany remained stark in March. Whereas 19.6 percent of the workforce in the east remained without employment during the month, only 8.8 percent of those in the western part of the country were jobless.