Employment falling in large parts of Germany

Nuremberg, Germany - A contraction in employment across much of Germany is likely to continue next year, according to a forecast released on Friday by the Institute for Employment Research (IAB).

A marginal increase in employment is expected in just three of Germany's 16 federal states: Berlin (+0.7%), Brandenburg and Lower Saxony (both +0.1%), according to the Nuremberg-based institute.

In all other states, the regional employment forecast points downward - primarily due to demographics. Fewer people are available to the labour market as high-birth-rate generations retire and fewer foreign workers migrate to Germany.

According to the IAB forecast, the sharpest drops in employment will be recorded in Saarland (1.3%), Thuringia (0.7%), Bremen and Saxony-Anhalt (both 0.6%).

At the same time, unemployment is also set to fall in many places - most sharply in Mecklenburg-Vorpommern by 3.9% and in Thuringia by 1.8%, the forecast adds.

However, the labour market researchers see no reason to celebrate. "Despite improved economic prospects, a general turnaround is not yet visible on regional labour markets," said the IAB's Anja Rossen.

Industrial locations hit

The trend is unfavourable in areas where the labour market is heavily dependent on industry. The manufacturing sector is struggling with severe structural problems.

The state with the highest unemployment rate is currently Bremen at 11.3%, while the lowest is Bavaria with 4.1%.

According to Federal Employment Agency chief Andrea Nahles, the labour market tends to react sluggishly to economic shifts.

It takes time for an economic downturn to become noticeable in the labour market - and conversely, it also takes a while for the labour market to respond once the economy picks up, Nahles said.