By GEIR MOULSON

BERLIN (AP) — The deepening economic crisis made its first impact on Germany's labor market last month, helping push up the unemployment rate in Europe's biggest economy to 7.4 percent, official figures showed Wednesday.

The unadjusted jobless rate was up from 7.1 percent in November, the Federal Labor Agency said. In total, 3.102 million people were registered unemployed last month — 114,000 more than in November.

"The December figures show that the economic crisis has reached the labor market," labor agency chief Frank-Juergen Weise said in a statement. "Our optimism for the year 2009 is therefore muted."

In seasonally adjusted terms, the number of people out of work rose by 18,000 — the first increase since February 2006, according to UniCredit economist Alexander Koch. The adjusted jobless rate was 7.6 percent, compared with the 7.5 percent recorded in November.
That "can be viewed as the turning point on the German labor market," Koch said. "The trend reversal cannot be halted and the negative dynamic on the labor market should pick up considerable momentum in the further course of this year."

He said he expected the number of people out of work to increase by 500,000 during 2009, even though heightened use of shorter working hours should help cushion the rise.

The German economy went into recession in last year's third quarter and is widely expected to shrink this year.

Thanks to an export-driven upswing, German unemployment had been drifting downward since it peaked at 12.6 percent in February 2005 — with a post-reunification record of 5.216 million people jobless. It hit a 16-year low in November.

The labor agency said that, over the whole of 2008, the unadjusted jobless rate averaged 7.8 percent, with 3.268 million people out of work — a decline of 508,000 from 2007, when the unemployment rate averaged 9 percent.

In an effort to cushion the economy and protect jobs, Chancellor Angela Merkel's governing coalition is currently hammering out a stimulus package with an expected value of up to euro50 billion ($67.5 billion) over two years.

It is likely to include large spending on infrastructure, for example improving schools and roads.

It would add to an existing euro23 billion package of measures that was widely criticized as being too cautious.