(c) 2013, Bloomberg News.

(c) 2013, Bloomberg News.

FRANKFURT, Germany Unemployment unexpectedly gained in August for the first time in three months in a sign that Europe's biggest economy is slowing after it surged in the second quarter.

The number of people out of work increased by a seasonally adjusted 7,000 to 2.95 million, the Nuremberg-based Federal Labor Agency said Thursday. Economists predicted a decline by 5,000, according to the median of 25 estimates in a Bloomberg News survey. The adjusted jobless rate stayed at 6.8 percent, near a two-decade low.

Some companies are still cutting jobs as countries in the euro-region's periphery struggle to emerge from recession. The labor market is a point of contention among German politicians as they campaign ahead of Sept. 22 elections, with Chancellor Angela Merkel opposing challenger Peer Steinbrueck's pledge to raise taxes and introduce a flat-rate minimum wage.

"This is not a big disappointment," said Heinrich Bayer an economist at Deutsche Postbank in Bonn. "The number of unemployed over recent months has been largely stable. If the economic recovery continues, the labor market should improve again in the coming months."

Germany's gross domestic product expanded 0.7 percent in the three months through June, after stagnating in the first quarter as a colder-than-usual winter curbed output. Growth will "normalize and stabilize" in the remainder of 2013, the Bundesbank said on Aug. 19. The Frankfurt-based central bank predicted in June that GDP will increase 0.3 percent this year and 1.5 percent in 2014.

While the 17-nation euro region, Germany's largest trading partner, emerged from six quarters of contraction in the second quarter with growth of 0.3 percent, Spain and Italy remained in a two-year long recession. Unemployment in the currency bloc probably remained at a record 12.1 percent in July, according to the median estimate in a Bloomberg News survey before Eurostat releases the data at 11 a.m. Friday.

ThyssenKrupp, Germany's biggest steelmaker, plans to cut 3,000 administrative jobs over three years and this month said it'll shut two plants at Neuwied. Salzgitter, the rival steelmaker that predicts a loss for 2013 amid waning demand in Europe, will eliminate more than 1,500 positions.

At the same time, General Motors's Opel division is seeking about 300 new engineers for its international technical development center in Ruesselsheim, close to Frankfurt. Hamburger Hafen & Logistik, the handler of about 80 percent of containers at Hamburg's port, will create about 100 jobs from September, board member Heinz Brandt told Hamburger Abendblatt in an interview published on Aug. 15.

"Unemployment rose during the summer break in August," Frank-Juergen Weise, head of the German labor agency, said in a statement Thursday. "Overall, the German job market is stable."

Merkel, whose Christian Democrats lead Steinbrueck's Social Democrats by 15 percentage points in the latest Emnid poll, has turned her campaign focus to the economy four weeks before parliamentary elections. During a rally in the eastern town of Wernigerode last week, she warned that plans by the SPD to raise taxes would upend Germany's robust labor market.

"It's the wrong thing to do during a time now where there are more jobs and our economy is largely in balance," she said.

Steinbrueck said Thursday in Berlin that his priorities for the first 100 days in office if he wins include a minimum wage of 8.50 euros ($11.28) an hour, equal pay for men and women, same pay for the same job for temporary agency workers and permanent staff, and tax increases for higher earners.

Germany and France hold the key to rebalancing the European economy and must follow through on promised reforms, according to European Union Economic and Monetary Affairs Commissioner Olli Rehn.

"In a nutshell, this calls for competitiveness-supporting economic reforms to the labor market, business environment conditions and the pension system in France, and for structural measures to further reinforce domestic demand in Germany," Rehn said today in prepared remarks for a speech in Alpbach, Austria.

_ With assistance from Jeff Black in Nuremberg and Kristian Siedenburg in Vienna.