Ifo's jobs outlook reaches lowest level in more than five years

A leading index of employment prospects in Germany fell once again in December - reaching its lowest figure since the first phase of the coronavirus pandemic in May 2020 - despite the government's economic stimulus package.

The employment barometre from the ifo Institute published on Friday fell to 91.9 points, down from 92.5 points in November. One of the main reasons is the prolonged weakness of the manufacturing sector, the Munich-based think tank said.

“In 2025, we experienced gradual job cuts, especially in industry,” Klaus Wohlrabe, head of surveys at ifo, said in a press release.

"The weak economy is continuing to slow down the labour market.”

Pessimism dominates

The German economy will grow again slightly next year thanks to the government's €500 billion ($85.4 billion) debt package, ifo and many other economists believe.

However, according to the monthly survey of several thousand companies conducted by the Munich-based economists, almost all sectors of industry plan to continue cutting jobs in the coming months.

Service providers and retailers are also cautious or are planning to reduce their workforce, ifo said. The construction industry is less pessimistic and intends to at least maintain its current staffing levels.

Only the tourism industry and management consultancies are optimistic about the coming months and plan to hire more employees next year, the report states.

Germany weak compared to other industrialized nations

According to a forecast updated in October, the International Monetary Fund (IMF) expects moderate average growth of 1.5% in Western industrialized countries and Japan.

The German economy, on the other hand, could stagnate once again this year, with the ifo Institute expecting gross domestic product to rise by 0.1%.

In 2026, German economic output could then grow by 0.8%, significantly less than hoped for when the new government took office in May.