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German unemployment climbs to highest level since June 2011

By Michelle Martin

BERLIN (Reuters) - German joblessness unexpectedly rose in October to its highest level since June 2011 on a seasonally adjusted basis, but the unemployment rate remained close to its lowest level since reunification more than two decades ago.

The number of people out of work increased by 2,000 to 2.973 million, data from the Labour Office showed. Economists had expected the reading to remain unchanged, according to the consensus forecast in a Reuters poll.

That tallies with recent announcements from German firms like chemicals maker BASF (BASFn.DE) and lighting maker Osram Licht AG (OSRn.DE), which have both said they will cut jobs due to competition from cheaper Asian rivals.

But the jobless rate held steady at 6.9 percent, making it the envy of struggling euro zone peers like Greece and Spain, where more than one in four people are out of work.

Moreover, data from the Statistics Office earlier on Wednesday showed the number of people in work in Germany rising above 42 million for the first time since East and West reunified in 1990.

"The German labour market still remains an important growth driver," said Carsten Brzeski, senior economist at ING. "Record high unemployment combined with yet another increase in real wages bodes well for private consumption."

Domestic demand is propping up growth in the traditionally export-oriented German economy as shipments abroad have weakened due to the euro zone crisis and a slowdown in emerging markets.

Combined with weather-related catch-up effects, it helped the German economy to grow at its strongest rate in more than a year in the second quarter after a contraction late 2012 and a weak start to 2013.

Breszki said households' purchasing power could rise further in the short term if a minimum wage is introduced. Chancellor Angela Merkel's conservatives and the Social Democrats are trying to hammer out a coalition deal, with the latter demanding a nationwide minimum wage of 8.50 euros per hour.

But some economists argue that this would lead to job cuts.

Other recent data has been downbeat, with business morale dropping, the private sector growing at its slowest pace in three months and industry orders falling, though exports and output have increased.

(Additional reporting by Sarah Marsh; Editing by Stephen Brown)