- Businesses seek to decrease workforce size
German Job Market Faces Challenges, Warning Signs Surge
In a shift from the muted chatter about a talent deficit, concerns about the job market are on the rise in Germany. The economic downturn has pushed numerous companies to consider personnel reductions. The employment barometer from the Munich-based Ifo Institute dipped to 93.0 points in February, a decrease from its January standing of 93.4 points. This slump, following a few brief peaks, marks a nearly three-year decline. The lowest point since this indicator's inaugural slump during the Corona pandemic's initial year was reached with this February reading.
As Ifo survey director Klaus Wohlrabe shared, "The labor market remains tense, influenced by economic structure changes." According to Wohlrabe, cutting staff is an impending possibility in all four surveyed sectors: industry, services, retail, and construction.
Industry and retail exhibit a greater inclination towards personnel cuts, while the trend is milder in services and construction. Each month, Ifo economists quiz around 9,000 companies concerning their intentions for personnel expansion, maintenance, or reduction. The companies' responses are then examined according to their respective value-added shares, to derive the indicator value.
Additional Insights:
- Industry and Manufacturing: The current demand for labor in manufacturing has seen a decrease of 19.85% year-over-year, while mechanical engineering experienced a decline of 13.81%. Maintaining employee numbers is forecasted for 2024, but challenges for the mechanical and plant engineering sector are expected in 2025[1].
- IT and Service Sectors: Job opportunities in IT support and infrastructure dropped by 24.05%, customer service saw a 26.46% decrease, project management fell 31.78%, and software development lost 32.67% compared to the previous year[1].
- Skilled Workers' Shortages: Despite common persisting gaps in labor-intensive fields like nursing and education, job advertisements show declines as well[1].
Because of the ongoing economic struggle and structural problems, the German job market faces a precarious landscape, with companies looking to pare their workforce.
Employers in various sectors, including industry and retail, are considering personnel reductions due to the economic downturn. The Ifo Institute's employment barometer, based in Munich, dipped to 93.0 points in February, indicating a nearly three-year decline and a warning sign for the German job market. The structural changes in the economy, as highlighted by Ifo survey director Klaus Wohlrabe, contribute to the tense labor market situation.
