Mechanical engineering job growth is decelerating, but not indicating a definitive reverse in trend as of now
Job Cuts Continue in Germany's Mechanical Engineering Sector, but at a Slower Pace
The mechanical engineering sector in Germany is experiencing continued job losses, with employment declining by approximately 2% in the first half of 2025, reaching around 1.01 million employees in firms with more than 50 workers. This trend aligns with a broader manufacturing downturn in Germany, where mechanical engineering jobs have fallen by about 2.5% since 2019.
The VDMA, the German Engineering Federation, predicts that job cuts will continue in the coming months, but at a slower pace. This figure represents a decrease of two percent compared to the previous year.
Several factors are contributing to these job cuts and employment declines. Global economic uncertainty is causing reduced investment willingness by firms, while structural changes and fierce global competition, including aggressive moves by Chinese manufacturers, are also playing a role. High energy costs and regulatory pressures, particularly from the EU, are reducing German firms’ competitiveness, especially in energy-intensive sectors like automotive and mechanical engineering. Trade tensions and tariffs, notably U.S. tariffs on German machinery and automotive exports, are compressing profit margins and disrupting export markets. Austerity and cost-cutting programs in major companies like Mercedes, planning significant job cuts as part of savings amounting to €5 billion over three years, are also contributing to the job losses.
Despite overall job losses, a persistent shortage of skilled workers remains a structural challenge, complicating replacement and retraining efforts.
However, there are some encouraging signs. The proportion of companies aiming to expand their core workforce increased from around 17 to 20 percent compared to the first quarter of 2025. More companies now expect short-time work to decrease (29 percent) rather than increase (19 percent). These figures provide initial signs of slight relief, but they are not enough to speak of a sustainable recovery, according to Johannes Gernandt, the VDMA's chief economist.
The development of an increasing proportion of companies aiming to expand their workforce and a decrease in expected short-time work is an encouraging sign, but it is not yet showing signs of reversing the trend of job losses. The VDMA does not expect an increase in employment in mechanical engineering companies in the near future.
Despite the ongoing job cuts, companies are also trying to hold on to core workforces, and there are ongoing investments in research and development within the sector, aiming to innovate and adapt to Industry 4.0 and green technologies such as green hydrogen.
In summary, the recent trend is slight but sustained employment decline due to global market pressures, high costs, trade disruptions, and structural shifts. Forecasts suggest continued pressure in 2025 and beyond unless significant reforms and strategic adaptations occur.
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