Germany's economy is closely tied to consumer demand in the US

The seasonally-adjusted total fell 89,000 from December to 3.4 million, the Federal Labour Agency said. But the unadjusted rate rose 0.6% to 8.7%.

Meanwhile separate data showed a 1.8% fall in German retail sales over the Christmas period, from the last quarter, as household spending slowed.

There are fears that Germany's economy could be hit by problems in the US.

A modest decline in job growth in January is usually expected with less outdoor work in the winter, and analysts were mostly upbeat about the job market's long-term prospects.

"Although the non-seasonally adjusted reading rose markedly, we think there is no reason to worry," said Andreas Rees, UniCredit's chief German economist.

"The latest figure was even better than compared to its long-term average in previous January months."

He added that high capacity and backlog orders meant that construction workers were in greater demand than usual, which meant that the typical January job blues were not as bad as they might have been.

Consumer weakness

Yet, even with greater job security, Germany's consumers have been reluctant to spend.

Belts were tightened over Christmas, with retail sales down 8.3% in December compared with the same month a year earlier, the Bundesbank data showed.

There had been hopes that the German consumer would be able to prop up the German economy as exports to the US, a key trading partner, slow down.

But this is now looking less likely.