The Institute for Employment Research, a research institute of the German Federal Employment Agency, has published its forecast for the economic and employment development in 2025.
According to the institute, the current year is expected to see a growth of 0.2 percent, with the number of employed individuals projected to decline to 46.06 million and the number of unemployed rising by 140,000 to 2.92 million. The institute had previously mentioned the possibility of three million unemployed by the end of 2024.
While the number of people in social security-insured employment is expected to increase by 60,000, this is mainly due to part-time work in the care, health and education sectors, which are largely publicly funded. The sector is expected to see a gain of 180,000 jobs in care and childcare, but a loss of 130,000 in the manufacturing and service sectors. Most of the new jobs are part-time.
The number of self-employed individuals is also expected to decline by 60,000, reaching its lowest point in 32 years.
The German economy is now in its third year of a “weak phase” according to the IAB. Investments in construction have decreased by 3.3 percent and in equipment by 5.5 percent. Private consumer spending increased by 0.3 percent in 2024, while government spending rose by 3.5 percent, although it is unclear if the former is adjusted for inflation.
The institute notes that the unemployment rate of low-skilled workers is significantly higher than in 2019. “The mismatch between qualification levels and job requirements has increased since Corona.”
Around 4.87 million people are classified as “marginal employees” meaning they have only a short or part-time job or are in one-euro jobs. Real wages are still below the 2019 level. The only hope for a boost lies in the financial packages, which are expected to lead to increased economic activity from the second half of the year. Without these packages, the GDP would likely decline further in 2025.
Professor Enzo Weber, the head of the research department, stated that a recovery of the economy without the financial packages is not currently foreseeable.