2024-04-26 21:12:36
The economic recession in Germany is increasingly affecting the labor market, with unemployment expected to rise to almost 2.8 million on average this year, the highest level since 2015, according to a study by the Institute for German Economics (IW).
“Last year the labor market was quite stable, despite the recession,” said IW labor market expert Holger Schaefer. “But this year we feel more strongly the consequences of the financial crisis”.
But economic research institutes also estimate that the number of unemployed in Germany will rise to 2.7 million in 2024.
Last year the German economy shrank by 0.3%. Although fewer goods and services were produced, the number of people employed however, it increased by 340,000 or 0.7%.
Companies are reluctant to hire
According to IW experts, the effects of the economic slowdown will now become more visible in the labor market:
“Firms’ employment plans show no growth for the rest of the year,” the study said. “Companies’ reluctance to hire new employees worsens job seekers’ chances of finding a suitable position.” As a result, unemployment continues to rise, according to the IW.
Current figures from the Ifo Institute also show that the German economy is slowing hiring new employees.
The employment barometer fell to 96.0 points in April from 96.3 points in March.
“The lack of orders is slowing down new hires for some companies,” said Ifo head of research Klaus Vollrabe.
Export-dependent German industry scaled back its hiring plans at the start of the second quarter: “The number of employees should fall,” according to Ifo economists. “This is especially true for energy-intensive industries.”
For the rest of this year, the IW’s hopes for a recovery in the labor market remain modest: According to the IW, some leading indicators provide little reason for optimism. “The number of newly reported vacancies fell to a five-year low in March.” Even if the economy is favorable, employment growth is expected to be modest at best this year.
The effects of net migration
According to IW, the number of hours worked will increase by 250 million hours or 0.4% in 2023.
Institute experts attribute this to the fact that companies tend to retain skilled workers even if they cannot currently operate at full capacity.
The IW explained that creating a significant number of new jobs in 2023 was not enough to reduce unemployment. In fact, there was an increase of 190,000.
The reason is also high immigration.
As of 2022, there has been a net migration of 1.5 million people, including one million refugees from Ukraine. In 2023, another 650,000 people immigrated in the first eleven months.
Almost no growth in 2024
It is doubtful whether the German economy will recover sufficiently in the coming months to support the labor market. In its spring forecast, the federal government currently expects growth of a low 0.3% this year.
The previous forecast was 0.2%. Finance Minister Robert Habeck expects growth of 1.0 percent for 2025.
In January, the IMF forecast 0.5% growth for the German economy. This is the weakest growth forecast within the group of seven leading Western industrialized countries (G7).
The IMF cites the continued weak consumer climate in Germany as one of the main reasons.
Economists also highlight population aging as a long-term problem.