Almost 4.26 million people were looking for work last month, 85,000 less than in May. The unemployment rate fell from 10.4 to 10.2 percent.

According to the Labor Office, the numbers are surprisingly low, even when seasonal factors are taken into account. Seasonally adjusted figures put the drop at 33,000. But it's not all good news. The jobless figures were still the highest for June since reunification in October 1990. And a year-on-year comparison reveals an increase of 303,100.

The head of the Labor Office, Florian Gerster, said that apart from the usual seasonal factors, the reduction was down to new legislation aimed at reviving the labor market. The authorities have stepped up efforts to broker jobs for the unemployed, with some success. One positive side-effect of this campaign is that some people have had their names struck from the register rather than have jobs forced on them.

Self-employment scheme working

Another central plank in the reforms was to encourage the jobless to go into self-employment by giving them grants and subsidies to help them set up their own mini-firms. Gerster said this scheme was also enjoying considerable success, with some 33,000 people pursuing the offer since the law came into effect in January. Around 8,000 of those did so in June.

Apart from those factors, the school holidays started unusually late this year, and unemployment caused by the holidays will not be reflected until the current month's statistics have been compiled.

Still no major economic upswing

Gerster also said the new momentum in the labor market was no flash in the pan. "We hope the development in seasonally adjusted unemployment figures will remain positive in the coming months," he said. But he warned that there would be no major improvement in the economy until next year. He went on to say that he expected the tax cuts planned by the government for next year to stimulate economic growth and lead to the creation of up 50,000 jobs.

The latest drop in the unemployment figures has surprised many analysts. A survey of 18 economists and bankers carried out by Reuters news agency found that they expected unemployment to rise by 15,000 in June. Peter Meister, of the ING BHF-Bank shared Gerster's view that the new labor laws were beginning to bear fruit.