UPDATE 1-German unemployment edges down in February

* Jobless rate just above post-reunification low of 6.8 pct

* News will be welcomed by Merkel with election looming

* Germany hoping domestic demand will offset weaker exports

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BERLIN, Feb 28 (Reuters) - The number of Germans out of work fell in February and the jobless rate remained close to a post-reunification low, bolstering hopes that domestic demand will help support growth in Europe's largest economy.

Labour Office data showed on Thursday that the number of people without a job dropped for a third month in a row by 3,000 in seasonally adjusted terms to 2.917 million in February. That was slightly below the consensus forecast in a Reuters poll of 29 economists for unemployment to fall by 5,000.

The unemployment rate held steady at 6.9 percent, putting February's reading a touch above the 6.8 percent that marked its lowest point since the country was reunified in 1990.

"(The) German labour market remains solid as a rock, defying the winter weather and the euro crisis," said Carsten Brzeski, senior economist at ING.

The low jobless rate is welcome news for German Chancellor Angela Merkel, who faces an election in September that could be influenced by the state of the economy. Germany is the envy of struggling southern euro zone states like Greece and Spain, where around one in four people are unemployed.

The government is hoping that the stable employment situation will boost private consumption this year to help offset weakness in euro zone trading partners. Germany exports some 40 percent of its goods to fellow members of the currency bloc.

The unadjusted jobless total, a politically important threshold in Germany, remained above the 3 million mark which it breached in January.

"The German job miracle has become less magic. However, even without magic and enchantment, the labour market should remain growth-supportive," Brzeski said.

A string of German firms have announced job cuts recently, with Commerzbank saying it planned to cut up to 6,000 jobs by 2016, Deutsche Telekom saying it would slash 1,200 jobs in Germany and Air Berlin announcing it would cut almost 10 percent of its workforce of 9,300.

Still, Labour Office chief Frank-Juergen Weise said the labour market was coping well with an economic slowdown seen at the end of 2012 and reamined "robust".

The German economy shrank by 0.6 percent in the fourth quarter, succumbing to a sharp fall in demand from its European partners, but economists expect the gloom to be short-lived and do not see Germany slipping into a technical recession, defined as two consecutive quarters of contraction.

Thursday's employment data is the latest in a string of data which points to a slight upturn in the first quarter, with morale among German businesses, investors and consumers improving, the private sector expanding and exports, orders and output rising.

(Reporting by Michelle Martin; Editing by Noah Barkin)