In view of the weak economy, the situation on the German labor market is now also deteriorating. This is reported by both the Institute for Labor Market and Occupational Research and the ifo Institute.
The economic downturn in Germany is increasingly having an impact on the job market. According to the Munich Ifo Institute, companies’ willingness to hire new employees is worse than it has been for a good two and a half years. In addition, the monthly labor market barometer from the Nuremberg Institute for Labor Market and Occupational Research (IAB) fell by 0.7 points in September and reached 99.8 points, the lowest value since the Corona crisis in 2020.
Prospects on the job market weaker than during the euro crisis
The Ifo Institute’s employment barometer, for which thousands of companies are surveyed, fell by 1.2 points to 95.8 points in September, making it the lowest value since February 2021. “The robust increase in employment over the last few months has come to a standstill come,” said the head of the ifo surveys, Klaus Wohlrabe. “Due to a lack of orders, positions that become vacant are rather reluctant to be filled.”
In view of the lack of new business, many companies in the industry are planning to get by with fewer staff. The same applies to trade and construction. The Ifo researchers also reported that the pace of hiring among service providers decreased noticeably. The personnel service providers have now also felt the reluctance in other sectors.
“The labor market prospects are somewhat weaker than at the end of 2012 during the euro crisis, the last recession before Corona,” emphasized Enzo Weber, head of the IAB research department for forecasts and macroeconomic analysis. The Nuremberg Institute’s barometer asks the expectations of all German employment agencies for the next three months. It is therefore considered an early indicator of the future development of the labor market. A value of 100 is considered a neutral outlook, a value below 100 indicates a negative development.
Employment agencies predict lower Employment increases
The index value is formed from several components. The unemployment component fell in September for the fifth time in a row and now stands at just 97 points. This signals how high the risk of becoming unemployed is. The employment component, which provides an indication of companies’ willingness to hire, also fell, but is still above the neutral value at 102.6 points.
“The employment agencies expect that employment growth will be significantly lower,” said Weber. The number of unemployed continued to rise in August. The Federal Employment Agency’s job index also fell to its lowest level in more than two years last month. However, the job centers are still not expecting “a collapse,” said the IAB expert. Despite everything, employment in Germany is still at a record level.
The background to the negative development is the weakening German economy: According to economists, Europe’s largest economy could fall into recession again in the second half of 2023 as it is hit by the weak global economy, increased interest rates and inflation. The leading research institutes recently lowered their economic forecasts for 2023 and 2024.