Improving Job Market Reflects Positive Trends for Employers and Job Seekers, Yet Underlying Issues Warn Economist
The German job market remains robust, at least on the surface. In a previous crisis, unemployment levels remained low, and employment was almost at record highs. Companies and job centers are starting to see a glimmer of hope, as they've improved their expectations for employment in April.
However, economist Carsten Brzeski sounds a warning note. beneath the surface, there are "deep cracks" in the labor market. The job market is wobbling.
Despite the German economy's long-standing stagnation, the labor market has weathered the storm relatively well. In the second year of the recession, employment even reached a record of nearly 46 million employed in 2024. It has remained historically high ever since. While the current unemployment figure is around 200,000 higher than a year ago, the feared jump over three million didn't materialize.
Brzeski warns that the employment miracle is over. The labor market has become a burden on the economy. Most worryingly, companies cannot find suitable candidates for more than one million open positions.
Many companies are desperately seeking skilled workers, according to a survey by the Institute for Employment Research (IAB). The unemployed, however, often don't match the qualifications, location, or expectations of job seekers.
The two most important surveys on the development of the labor market in the next six months also provide encouragement. They come from the IAB and the Ifo Institute.
Job centers expect rising unemployment, according to the IAB Employment Barometer. The index remains below the neutral 100 points and continues to signal growing tension on the labor market. The Ifo survey of companies also paints a picture of stabilization, but there are signs of growing uncertainty.
Germany's growth problem is increasingly evident in a loss of competitiveness. The labor market is struggling to adapt to rapid technological and industrial shifts. Germany faces structural challenges like wage and productivity pressures, a skilled labor mismatch, industrial restructuring, the digitalization and AI transition, and bureaucratic inertia.
Brzeski hopes for more investments to boost productivity. AI could play a crucial role in this. However, rapid reskilling programs will be needed to help workers adapt to new roles and emerging industries. Without these changes, it may not lead to another "employment miracle," but perhaps only to a new "productivity miracle."
- What is Brzeski's warning about beneath the surface of the German labor market? There are "deep cracks," he says, as the job market is wobbling.
- How has the labor market fared during the recession, despite the German economy's stagnation? In the second year of the recession, employment even reached a record of nearly 46 million employed in 2024.
- What is a challenge the German labor market is facing in adapting to rapid technological and industrial shifts? There is a skilled labor mismatch, meaning many companies cannot find suitable candidates for more than one million open positions.
- What changes does Brzeski hope for to prevent another "employment miracle" and possibly lead to a new "productivity miracle"? He hopes for more investments to boost productivity, AI could play a crucial role, but rapid reskilling programs will be needed to help workers adapt to new roles and emerging industries.
