Germany’s incoming government has promised a revival – but companies remain pessimistic about the economic outlook this year. What does this gloomy perspective mean for job offers and redundancies?
It’s been a grim year so far for working-age people in Germany. Last year, the economy shrunk by an estimated 0.2 percent, marking the second year of recession for Europe’s largest economy. This year, meanwhile, turbulence on the stock market caused by punitive US tariffs have shaken the country’s fragile hopes of recovery.
Amid the relentless slew of bad news, a number of Germany’s biggest firms have announced their plans for layoffs. These include major car brands like Volkswagen and Audi, tech heavyweights like Bosch and Siemens and engineering company Thyssenkrupp, as well as Deutsche Post and Deutsche Bahn.
For those affected by job cuts – and those still clinging onto their jobs – there’s hope that a change of government in Germany will bring about the hoped-for recovery. Incoming Chancellor Friedrich Merz (CDU) has already earmarked a whopping €500 billion investment fund to fix the country’s infrastructure, which – along with additional defence spending – is expected to boost the economy.
Nevertheless, it seems a significant proportion of German companies are still eyeing layoffs this year.
According to the German Economics Institute (IW), more than a third of businesses are planning to make job cuts in 2025. In a recent survey of employers, researchers found that 35 percent were considering staff reductions, compared to 24 percent who were planning to hire more staff.
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Taken together, the IW’s data points to a net decline of ten percent in the jobs market.
This marks a slight improvement over the figures collected by the institute in autumn last year, when 38 percent were planning layoffs and just 17 percent were planning to hire.
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However, despite the slight uptick in the companies looking to expand their workforce, the overall mood remained gloomy. In the most recent IW survey, less than one in five – or 18 percent – reported that their situation had improved since last year, while 40 percent reported a further downturn.
Which sectors are the worst hit?
Out of the sectors surveyed by IW researchers, industry emerged as the sector where jobs could be hit the most. This includes a range of manufacturing and supply companies in fields like aerospace, machinery, the auto industry, chemicals and electronics – in other words, many of Germany’s most well-established sector.
Here, more than two in five companies (42 percent) said they expected they would have to lay off staff over the course of the year. In contrast, around half this figure (20 percent) wanted to take on more employees.
An employer reviews a CV. Photo: picture alliance/dpa/dpa-tmn | Christin Klose
In the construction industry, the outlook was also less than positive, with 31 percent expecting job cuts and just 18 percent expecting to hire.
The service industry, which covers hospitality and tourism, transport companies, software and financial services, and healthcare providers, among others, had the most positive predictions for the coming year. In this sector, 36 percent could see themselves hiring staff in the near future, while 21 percent were planning to make cuts.
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What are the regional differences?
Though the IW didn’t track the perspectives for jobseekers by region, it did note another key figure to track the health of the economy in various German states: expectations for production.
This showed some regional differences in the outlook for the coming months.
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In northern Germany, for example, there was relative positivity, with 31 percent expecting to ramp up production and 20 percent expecting a slowdown. In the industrial heartland of North Rhine-Westphalia, the balance sheet came out even, with 25 percent expecting more production and 25 percent expecting less.
Bavaria told a similar story, with 30 percent forecasting growth and 28 percent predicting a downturn.
In Baden-Württemberg the situation appeared the worst. Here just 19 percent thought production would go up in 2025, while 39 percent believed it would go down.
Why is the outlook still so gloomy?
According to the Cologne-based research centre, Germany continues to be buffeted by an unpredictable and rocky international climate, as well as high energy costs and ongoing conflicts in Europe and the Middle East.
“German industry continues to suffer from the geopolitical conflicts and the resulting weaker global economy,” IW researchers explained in their report. “The uncertainties of the new US administration are exacerbating this.”
US President Donald Trump delivers remarks on reciprocal tariffs during an event in the Rose Garden at the White House in Washington. Photo: Brendan Smialowsk / AFP.
When the IW collected its data, US President Donald Trump had not yet announced his wave of “retaliatory” tariffs on almost every country in the world, which sent shockwaves through the stock markets and US bond markets.
Though Trump has since put plans for a 20-percent tariff on EU goods on hold, there is still a blanket 10-percent tax on imports entering the US from abroad.
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This is in addition to 25 percent tariffs already imposed on auto manufacturers and the aluminium and steel industries.
With the US constituting Germany’s largest export market by far, these are set to have a profound impact on some of the country’s key industries.
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