German unemployment fell more than expected in May to a 25-year low, as a result boosting hopes that Europe's biggest economy will be able to absorb the mass influx of refugees into the nation.

The total monthly number of people out of work in seasonally adjusted terms fell by 11,000 to 2.695 million in May, the Federal Labour Agency said on Tuesday. Analysts had forecast a drop of 5,000.

This was despite an increase in refugees registering as unemployed last month with the labour agency expecting a bigger gain in asylum seekers without jobs as the year unfolds.

"Altogether the labour market continues to develop positively," labour agency chief Frank-Juergen Weise said.

"Employment has grown rapidly and the demand for labour has increased significantly," he said.

The number of people from so-called asylum-seeking nations without a job stood at 145,000 in May - 9,000 more than in April and double the number for the same month last year, the labour agency said.

The majority of the applicants were from Syria, Iraq and Afghanistan.

About 1.1 million refugees arrived in Germany last year fleeing war and economic deprivation in Africa, South Asia and the Middle East.

The labour office expects the number of refugees to climb by about 15,000 a month in the second half of the year.

However, it said the scale of the increase would depend on how quickly officials can process asylum applications.

Officials have also revised down their projections for the number of unemployed asylum seekers they expect in Germany this year.

This followed German-led efforts to halt the flow of migrants into the European Union from Turkey along with the closure of the so-called Balkans route, which was used by many refugees as their path to northern Europe.

The labour agency now expects 100,000 more refugees to register as unemployed this year, compared with 2015. At the start of the year, officials had estimated the number at 130,000.

Highlighting the gaps that have opened up in the German workforce and the nation's need for skilled workers, the labour office said there were 655,000 job vacancies in May - 98,000 more than in April.

But at 6.1 per cent, the German jobless rate now stands at its lowest rate since German reunification in October 1990.

Seasonally unadjusted unemployment also fell, dropping by 80,000 during May to 2.664 million, the labour agency said, with the jobless rate declining to 6 per cent compared with 6.3 per cent in April.

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