German unemployment has inched downwards, but remains above the crucial 4 million mark just three weeks before a hotly contested general election.

The Federal Labour Office reported that unadjusted unemployment fell by 28,700 in the month to 4.018 million in August, a rate of 9.6%.

The change is unlikely to be enough to help Chancellor Gerhard Schroeder's attempts to secure re-election, which have been hampered by the sluggish performance of the German economy.

Edmund Stoiber, Mr Schroeder's conservative opponent, has made political capital out of the relative success of Bavaria, the state where he serves as premier.

This is the last unemployment report before the 22 September poll, with pollsters saying the race is too close to call.

Here to stay?

Political considerations aside, there is still little optimism over attempts to beat joblessness back down to the 3.7m-3.8m levels it touched a year ago.

The latest dip is seen as the result of working to clean up this summer's floods, rather than any more lasting effect.

The country's persistently high unemployment relates to the depressed state of the eastern economy since unification in 1990, as well the fact that the country as a whole is emerging from recession far more slowly than hoped.

"Companies will remain under pressure to cut jobs, and I don't see any clear turnaround in the labour market in the foreseeable future, especially when growth forecasts are being revised down," said Rainer Guntermann of Dresdner Kleinwort Wasserstein.

Office optimism

At the Federal Labour Office, the mood was a little more optimistic.

The weak economy is a gift for challenger Stoiber

The head of the office, Florian Gerster, said he expected unemployment to fall below four million in the next two months.

"I expect at the end of the year a pick up and from the beginning of next year a clear change in the trend in seasonally adjusted data," he said.

"The trend change is coming although perhaps not as soon as we would have liked."