BERLIN / FRANKFURT - German unemployment declined more than economists forecast in September, suggesting the labor market in Europe's largest economy is weathering the region's worsening debt crisis.

The number of people out of work fell a seasonally adjusted 26,000 to 2.92 million, the Nuremberg-based Federal Labor Agency said on Thursday. That's the biggest drop since April. Economists had forecast a decline of 8,000, the median of 24 estimates in a Bloomberg News survey showed. The adjusted jobless rate slipped to 6.9 percent from 7 percent in the previous month.

Germany's unemployment has reached the lowest level since the country's reunification two decades ago after increasing global export demand prompted companies to step up spending and hiring. That growth momentum has been sapped by a possible recession in the United States and the threat of a renewed financial crisis that could be triggered by a sovereign default in Greece.

"We hear a lot of talk of recession and weakness, but the labor market doesn't reflect that right away," said Andreas Scheuerle, an economist at Dekabank in Frankfurt. "Given the uncertainty, companies might become more cautious regarding investing and hiring. I don't expect unemployment to rise over the coming months, but show more of a stagnation."

'Full tilt'

Bayerische Motoren Werke AG Chief Financial Officer Friedrich Eichiner told reporters on Sept 8 that the Munich-based automaker's plants are "working at full tilt". German rival Audi AG is increasing hiring to boost output and Porsche AG is seeking to fill about 130 engineering positions at its Leipzig factory.

German spending and output have helped power the region's expansion. Export growth accelerated in the second quarter, helping counter a drop in consumer demand and construction output. Imports increased 3.2 percent in that period, up from 1.7 percent in the previous three months.

In September, business confidence fell less than economists forecast. The Ifo Institute in Munich said on Monday that its sentiment index, based on a survey of 7,000 executives, dropped to 107.5 from 108.7 in August. Economists in a Bloomberg survey had projected a drop to 106.5.

German exports

With European governments seeking ways to plug their budget gaps, German companies may struggle to maintain their sales growth. Exports unexpectedly declined in July and manufacturing growth slowed this month, underscoring signs the economy is losing momentum. German investor confidence this month fell to the lowest in more than two and a half years.

The International Monetary Fund on Sept 20 lowered its growth forecast for both Germany and the eurozone this year and next. The European Commission on Sept 15 cut its eurozone growth forecasts for the second half and warned the economy may come "close to standstill at year-end".

Bernhard Maier, sales chief at Porsche, said the carmaker will be able to weather a global slowdown.

"I'm very confident that we'll have a chance to keep growing next year even if economies are cooling down somewhat," he said. "We're seeing no reaction to our order intake and sales" from recent stock market turbulences.

Bloomberg News