Employers feel more confident about hiring

Figures showed June's jobless numbers fell 37,000, on a seasonally adjusted basis, to 3.82 million - reducing the unemployment rate from 9.2% to 9.1%.

The unemployment trend has been heading downwards for a year, although the jobless level fell just 2,000 in May.

Healthier exports and improved domestic spending, allied to the upturn in the eurozone, has spurred firms to recruit.

Recovery sign

"The demand for workers continues to grow," said Frank-J Weise, chairman of the Federal Labour Office.

Analysts said the figures - which exceeded consensus forecasts of a 20,000 drop - signalled Germany's economic recovery was sustaining itself.

The rising tide of German employment is an important precursor for sustainable recovery David Brown, Bear Stearns

But there are lingering concerns about future prospects should eurozone interest rates rise further.

The European Central Bank (ECB) has been steadily lifting rates in an effort to keep inflation in check, putting them up to 4% last month.

Some experts believe they could rise as high as 4.5% by the end of the year.

"The rising tide of German employment is an important precursor for sustainable recovery going forwards," said David Brown, chief European economist at Bear Stearns.

"The only concern is whether Germany has already passed the peak in job creation at the end of last year and this is something the ECB will need to factor into future calculations."