FRANKFURT (AFP) - Unemployment in Germany fell to its lowest level in four years in October, confirming the broadening upturn in Europe's biggest economy.

And that could lead the European Central Bank to continue raising its key interest rates next year, analysts said Thursday.

The German jobless total fell by 152,000 to 4.085 million in October in raw or unadjusted terms, bringing the jobless rate down to 9.8 percent from 10.1 percent a month earlier, the Federal Labour Agency in Nuremberg calculated.

Both the jobless total and the jobless rate were therefore at their lowest levels since November 2002.

Labour office chief Frank-Juergen Weise said that usual autumn upturn was having a positive effect on the labour market.

And Weise forecast a "stable" trend on the labour market in 2007.

Even after taking seasonal factors into account, there was also a reduction in the jobless queues last month.

Seasonally adjusted data published separately by the Bundesbank showed a decline in the German jobless total of around 67,000 to 4.348 million in October.

The adjusted jobless rate also remained declined to 10.4 percent from 10.6 percent a month earlier, the German central bank said.

The data were better than expected: analysts' consensus forecasts had been pencilling in a decline of 20,000 in the adjusted jobless total.

The government was quick to hail the latest jobless data as a "breakthrough".

"All the moaners and kill-joys can no longer deny it -- we have a breakthrough on the labour market. We have cause for celebration," said Labour Minister Franz Muentefering.

Analysts were also pleased by the numbers.

Bank of America economist Holger Schmieding noted that there had likely been some skewing of the seasonal components behind the data, since the reporting data had brought forward.

However, "looking beyond such volatility, the data confirm a broadening upturn," Schmieding said.

In fact, separate employment numbers published by the federal statistics office Destatis in Wiesbaden showed a rise in the number of jobs of 24,000 in September, bringing the number of new jobs created since the trough in employment in June 2005 to 402,000, the analyst noted.

UBS economist Stephane Deo said he believed the German economy, for a long time one of the worst-performing economies in the 12-nation eurozone, had "improved structurally, notably in terms of internal competitiveness."

Deo suggested that "a virtuous cycle" had switched in.

If the labour agency's budget continued to improve -- it is expected to run up a huge surplus this year -- that could pave the way for further cuts in social contributions.

"This would reduce the cost of labour and support job creation," Deo argued.

Commerzbank economist Matthias Rubisch predicted that the positive trend in unemployment would continue in the coming months. And that, in turn, would help support private consumption in face of the upcoming rise in value-added or sales tax (VAT) at the start of next year.

Schmieding at bank of America agreed.

"Stronger employment growth and a modest acceleration in wage inflation will largely offset the impact of the VAT hike," Schmieding said.

At the same time, the strong data would strengthen the case of higher interest rates, the economist continued.

"With the eurozone set to enjoy above-trend growth in late 2006 and to enter 2007 with considerable momentum, the ECB will likely go beyond the widely anticipated rate hike to 3.5 percent in December and raise rates further to 3.75 percent in March," Schmieding said.

The ECB was meeting for its regular monthly policy-setting meeting in Frankfurt on Thursday.

The guardian of the euro was not expected to raise rates this week, but would likely pave the way for an upward move in borrowing costs in December, analysts said.

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