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The number of people out of work in Germany rose to 2.96m in May — the highest May number seen since 2010 — the national employment agency said on Wednesday.
The monthly increase, which came to 34,000 in seasonally-adjusted terms, was significantly higher than the 10,000 expected.
The unemployment rate nonetheless remained unchanged month-on-month at 6.3%, despite showing a rise in year-on-year terms.
“The rise of unemployment when compared to the previous year is due to the weakness of the manufacturing sector. There are however signs that things are looking up, which has to do with the planned expansionary fiscal policy of the new government,” Dr. Cyrus de la Rubia, chief economist of Hamburg Commercial Bank, told Euronews.
Germany has recently approved a constitutional amendment to its ‘debt brake’ rule, meaning defence spending above 1% of GDP will not be subject to borrowing limits. The government has also created a €500 billion extrabudgetary fund for additional infrastructure spending, set to provide Germany with an economic boost.
“The main challenge for the new government is only in part the people without work, but rather the fact that many industries still suffer from labour shortages,” de la Rubia added.
“The new government under Chancellor Friedrich Merz wants to combat this with a combination of measures, including incentives for retired people to continue to work, a targeted immigration policy, and a policy which encourages unemployed people to look more actively for a new job.”
Aside from a lack of skilled workers, Germany’s economy has been facing a series of headwinds. These include the long-term impact of Russia’s energy supply cuts, ageing infrastructure, excessive bureaucracy, low public investment, and growing competition from Chinese manufacturers.
Even so, Carsten Brzeski, the Global Head of Macro for ING Research, noted in response to Wednesday’s data that “the German labour market has been in a very gradual soft landing since 2022”.
“While the number of unemployed has increased from 2.2 million in May 2022 back to almost 3 million again currently, the number of vacancies has come down since late 2021. The fact that, until recently, employment was at record highs can be explained by migration flows.”
Even so, Brzeski added that a hiring pickup hasn’t revived private spending, particularly as a “large part of the recent job growth took place in part-time and low-wage jobs”.
Although migration can help to fill job vacancies, Germany’s labour outlook is clouded by cost-cutting measures in certain industries and the potential fallout from US President Trump’s trade wars.
