2025 Outlook: Job Market Stagnation - Industry Tumble - Rise of Socially Secured Employment
Has Germany's employment rate plateaued?
The employment chart in Germany keeps soaring, mainly thanks to service providers and immigration. However, the future is looking grim, especially for the industry sector. Demographics are also becoming more noticeable, leading some to question if the employment peak has already been reached.
lz Frankfurt
Despite ongoing economic downturns and industry crises, the employment rate reached a new zenith last year. On average, around 46.1 million people were employed, according to the Federal Statistical Office. "This was the highest number of employed individuals since German reunification in 1990," the statement declared. Service providers created new opportunities, while the industrial and construction sectors shed positions.
The record set in 2023 was broken by 0.2% or 72,000 individuals - even though Europe's largest economy contracted for the second year in a row in 2024, according to leading economic research institutes. "Except for the corona year 2020, the number of employed individuals has been on an upward trend since 2006," the statisticians noted. However, the momentum has slowed down significantly since mid-2022. In 2023, the growth was only 336,000 (plus 0.7%), almost half as much as the previous year. And it's weakening again.
Migration fuels labor market
The increase in employment was powered by immigration of foreign workers and an increased employment rate of the domestic population. "These two growth drivers outweighed the dampening effects of demographic change, which contributed to the increased exit of the baby boomer generation from the labor market," the Federal Office explained. In 2024, only service providers boosted the increase in the number of employed individuals: Here, it grew by 153,000 people or 0.4%, totaling 34.8 million people. Conversely, there were job losses in the manufacturing sector and the construction industry.
Reversal in the new year
Headwinds are expected in the new year due to the anticipated continuation of the economic downturn. Competitive economic associations anticipate job cuts in their industries, while only a few expect more jobs, as per a survey by the employer-friendly Institute of the German Economy (IW Cologne). The manufacturing, iron and steel, mechanical engineering, and construction sectors are likely to see fewer employment opportunities. Optimism prevails in the pharmaceutical industry, aerospace, and the investment sector.
*Comment: Short-lived jobs record*
In the manufacturing sector (excluding construction), the number of employed individuals fell by 50,000 or 0.6% to 8.1 million. The upward trend in the construction sector, which had been ongoing since 2009 and interrupted only once in 2015, ended with a decline of 28,000 employed individuals (a slide of 1.1%) to 2.6 million. In the agriculture, forestry, and fishing sector, there were 3,000 fewer employed individuals than the previous year, a decrease of 0.5% to 569,000. "This continues the negative trend of recent years," it was noted.
Reduced Self-Employment
Overall, the number of employees in Germany grew by 146,000 or 0.3% to 42.3 million on average for the year. Statisticians emphasized the benefits for socially secured employment. There were slight losses in the number of marginally employed individuals (low-wage and short-term workers, as well as individuals in so-called work opportunities). The downward trend that has been ongoing since 2012 also continued among the self-employed, with their numbers declining by 74,000 individuals or 1.9% to 3.8 million.
Enrichment Data:
2025 Job Market Outlook
- Industry Sector Contraction: Manufacturing grapples with intense international competition (especially from China) and geopolitical tensions, leading to job losses.[1]
- Policy-Driven Adjustments: The new coalition government plans to cut red tape and invite more skilled workers via a centralized "Work-and-Stay" agency.[3] However, these reforms may take time to offset immediate shrinkage in labor-intensive industries.
- Minimum Wage Impact: Planned minimum wage increases to €15/hour by 2026 (from €12.82 in 2025)[3][4] could stress industries reliant on low-wage labor, potentially accelerating automation or operational restructuring.
While structural reforms and digitalization efforts may stabilize the labor market in the medium term, immediate job growth in 2025 seems subdued, particularly in traditional industries vulnerable to global trade fluctuations.[1][3]
- The employment rate in Frankfurt reached a new high in 2023 with around 46.1 million employees, but due to ongoing economic downturns, particularly in the manufacturing and construction sectors, there could be a reversal in the new year.
- In 2025, the industry sector is expected to contract, which could lead to job losses, especially in labor-intensive industries such as manufacturing, mechanical engineering, and construction.
- The new coalition government is planning to cut red tape and invite more skilled workers via a centralized "Work-and-Stay" agency, but these reforms may take time to offset immediate shrinkage in the industry sector.
- Planned minimum wage increases to €15 per hour by 2026 could stress industries reliant on low-wage labor, potentially accelerating automation or operational restructuring, and this could also impact the job market outlook in 2025.
