German companies are suffering from the weak economy and are increasingly hesitant to hire new employees because of the uncertain future. In some sectors there are even signs of job cuts.
Given the uncertain economic situation, German companies want to hire fewer staff than they did three years ago. The ifo employment barometer fell to 94.9 points in February after 95.5 points in January, the research institute announced.
This is the lowest level since February 2021, when the corona pandemic weighed on the economy. “The weak economic development is making companies hesitate when it comes to hiring new employees,” said the head of the ifo surveys, Klaus Wohlrabe, commenting on the development. “The loss of jobs is no longer ruled out.”
The ifo employment barometer is based on around 9,500 monthly reports from companies that communicate their employment plans for the next three months.
IT industry remains strong
According to the information, almost all industries are affected. In the industry, there are still signs of workforce reductions. The weak consumption development is particularly a problem for stationary retail. Current business should therefore be managed with fewer staff. The crisis in the construction industry is also reflected in the ifo data in terms of employee development. The construction industry has been suffering for some time from rising material and interest costs.
“In the service sector, the barometer is still slightly positive, but the pace of hiring has weakened significantly,” say the researchers. However, the willingness to hire IT service providers and consultants remains unbroken.
Leading indicator points to rising unemployment
The leading indicator from the Institute for Labor Market and Occupational Research (IAB) was also published today. Unlike the ifo employment index, it shows a slight relaxation and rose by 0.5 points to 98.0 points in February. However, the leading indicator still shows rising unemployment. There is still a risk that unemployment will become more entrenched, it said.
The component predicting employment also weakened by 0.6 points to 102.5 points. “Even in a downturn, workers are scarce in many areas,” said IAB expert Enzo Weber. “That already limits the possible increases in employment.”
Recession threatens
The German economy is currently developing weakly. Europe’s largest economy shrank by 0.3 percent in the fourth quarter of 2023. If there is another minus in the current quarter, it is referred to as a technical recession. According to its annual economic report, the federal government assumes that the economy will only grow by 0.2 percent this year.
The economists at the Organization for Economic Cooperation and Development (OECD) are currently assuming that the German economy will grow by 0.3 percent this year.