GERMAN unemployment fell again in October, but the effects of the financial crisis lingered and it was still too early to expect a turnaround in the economy, the country's labor ministry said.

The unadjusted jobless rate in Europe's biggest economy was 7.7 percent, down from 8 percent the previous month and below the 8.3 percent in August, the Federal Labor Agency said.

A total of 3.229 million people were registered as unemployed - 118,000 fewer than the previous month.

"The economic crisis can be seen on the job market also in October," agency head Frank-Juergen Weise said.

"However, that development has calmed down a little bit during the last months."

Despite the second consecutive drop, Weise said it remained premature to speak of a full-blown economic turnaround in Germany.

The dip in unemployment comes nearly two weeks after the German government raised its growth forecast and predicted that Europe's biggest economy will expand by 1.2 percent in 2010, up from an earlier prediction of 0.5 percent.

The new forecasts were also more optimistic about this year, predicting the economy will shrink by 5 percent instead of the 6 percent foreseen in April.

Germany's export-fueled economy returned to modest growth in the second quarter following a deep recession.