IAB expects a decline in employment in most federal states
Image: BMW (illustrative)
The ongoing economic weakness continues to have an impact on the German labor market. This is especially true for industrially focused regions where industries such as automotive face pressure to adapt.
According to a regional forecast by the Institute for Labor Market and Employment Research (IAB), employment will only grow in three federal states. By 2027, employment is expected to decline in most states. Only Berlin with 0.7 percent, along with Brandenburg and Lower Saxony each at 0.1 percent, will still see employment growth. Unemployment, on the other hand, is rising in ten federal states, though the unemployment rates are likely to change little.
The current regional forecast shows a 0.1 percent decline in employment for both West and East Germany. The greatest job losses are expected in Saarland at 1.3 percent, Thuringia at 0.7 percent, and Bremen and Saxony-Anhalt at 0.6 percent each.
Significant regional differences in the labor market
"The ongoing economic weakness from previous years still leaves its mark, although the upward trend in unemployment has slowed considerably," explain the study authors. The individual federal states show very different developments. Declines are expected in Mecklenburg-Vorpommern at 3.9 percent and Thuringia at 1.8 percent. Unemployment rates are also likely to fall in Saarland, Bavaria, Brandenburg, and Bremen.
The highest increases in unemployment are projected for Saxony at 1.9 percent, followed by Berlin at 1.8 percent and Schleswig-Holstein at 1.7 percent. “Despite improved economic prospects, there is still no overall turnaround in regional labor markets,” said IAB researcher Anja Rossen.
At the state level, Bavaria still has the lowest unemployment rate at 4.1 percent, while the city-states of Bremen with 11.3 percent and Berlin with 10.6 percent continue to have the highest rates. In seven of the 16 states, the unemployment rate in 2027 will be the same as it was the previous year. The biggest change, a decrease of 0.3 percentage points to 7.6 percent, is expected in Mecklenburg-Vorpommern.
Regions with a strong presence of the manufacturing sector are experiencing declining employment numbers and rising unemployment. “The unfavorable situation in manufacturing is due to structural challenges within the industry, which the recent economic improvement has not been able to address sufficiently,” explains IAB researcher Sarah Kuhn.
“The automotive industry, in particular, is under increasing pressure to adapt,” it states. In addition to the declining competitiveness of German industrial goods in world markets, demographic changes are becoming increasingly apparent. Regions such as Mecklenburg-Vorpommern and Thüringen, which have relatively unfavorable demographic trends, are also showing declining employment and unemployment rates.
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Thomas Langenbucher is an expert in electromobility with professional experience in the automotive industry and finance sector. Since 2011, he has been covering electric vehicles, sustainable technologies, and mobility solutions for ecomento.de. Learn more.
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