German unemployment fell for a second month in June, suggesting Europe's largest economy may emerge from a slump later this year as consumer confidence recovers.

　　The number of people out of work declined by a seasonally adjusted 33,000 from May to 4.41 million, the biggest drop since May 2000, the Federal Labor Office said in Nuremberg. The un-employment rate fell to 10.6 percent from 10.7 percent.

　　"We're sticking with our strategy to keep skilled workers even in difficult times and hiring on a case-by-case basis as opportunities arise," said Hubert Forster, chief financial officer of Muehlbauer Holding AG & Co in Bavaria, a maker of machines for the electronics industry. "It's too early to sound the all-clear: orders are still being delayed."

　　Germany's US.3 trillion economy contracted in the first quarter and may have shrunk again in the second, Berlin's DIW research institute said. There are signs that the worst may be over after consumers grew more confident for a fourth month in June and the European Central Bank reduced interest rates to the lowest in more than half a century.

　　Some economists said the second monthly decline in unemployment reflected the government's overhaul of its job placement system, incentives to create low-paid jobs and programs to encou-rage the unemployed to set up one-person companies.

　　"The economy's weakness continues to weigh on the labor market," Labor Office Chairman Florian Gerster told a press conference in Nuremberg. "But we also have reason to be cheerful. Government measures to stimulate work placements positively influenced last month's jobless figures."

　　The European Central Bank last month reduced borrowing costs to the lowest in more than half a century to help the economy of the 12 euro nations. The ECB cut its benchmark interest rate by half a point to 2 percent on June 5 in a bid to bolster the economy after it scaled down expectations for growth this year.

　　German exporters are suffering from the euro's gains against the dollar, which has forced companies including truckmaker MAN AG and machine maker IWKA AG to cut jobs. Factory orders fell for the third month in four in May.

　　A report on German industrial production scheduled for release at noon will probably show output increased 0.2 percent in May after falling for two months, a survey of economists showed.

　　The euro reached an all-time high of US.1933 on May 27. It has gained 16 percent in the past year, making German goods more expensive in the United States. and other markets outside the dozen countries sharing the euro.