Researcher: German labour market is shrinking

The German labour market is shrinking, facing pressure on all sides, researchers said on Friday. 

"Years of economic weakness and the economic consequences of geopolitical conflicts, as well as declining migration and a shrinking labour force, are putting pressure on employment from various quarters," said economic researcher Enzo Weber from the Institute for Employment Research (IAB) at the presentation of the latest labour market barometer.

The barometer, which is used to forecast the situation on the labour market, comprises two components: unemployment and employment. 

For the IAB barometer, all German employment agencies provide their forecasts for the next three months.

Labour shortages

Until now, the comparatively favourable employment situation had made the overall picture appear more positive. Now, however, the employment component has fallen below 100, pointing to an unfavourable trend. 

The main reason for this is the shortage of workers. The unemployment component, which had previously always lagged significantly behind employment, is catching up and is now almost on a par with it.

“Demographic decline has finally reached the labour market: Employment is falling, whilst the rise in unemployment is coming to an end,” said Weber. Put simply, this means that the "baby boomer" generation is retiring, and there are not enough people coming through to replace them. As a result, vacant jobs cannot be filled – and overall employment is falling.