German Unemployment Rises Amid Economic Slowdown

German Unemployment Increases Amid Economic Challenges

By Maria Martinez

BERLIN (Reuters) -The number of people out of work in Germany rose in March at the fastest rate since October of 2024, data showed on Friday, as an economic malaise puts pressure on the job market even against a backdrop of long-term labour shortages.

The office said the number of unemployed increased by 26,000 in seasonally adjusted terms to 2.92 million. Analysts polled by Reuters had expected that figure to rise by 10,000.

The seasonally adjusted jobless rate rose to 6.3% from 6.2% the previous month, slightly higher than a forecast of analysts polled by Reuters.

"March marks the start of the so-called spring recovery on the labour market. This year, however, the economic slump is noticeably slowing it down," said Andrea Nahles, the head of the labour office.

Smarting from two consecutive years of decline in 2023 and 2024, Europe's largest economy is still battling persistent weakness and structural headwinds in industry.

The number of unemployed people in Germany has not been above 3 million over the last 10 years.

Economic weakness and structural challenges were also reflected in the fact that the number of open positions was decreasing, said the director of the German Chamber of Commerce, DIHK, Achim Dercks.

FEWER JOB OPENINGS

There were 643,000 job openings in March, 64,000 fewer than a year ago, showing a slowdown in labour demand, the federal labour office said.

"We need a turnaround in growth and investments so that employment picks up again," Dercks said, noting that employment had fallen significantly, particularly in industry.

The dire economic situation is reflected in the country's storied auto industry, with Volkswagen and others cutting jobs on weak demand.  

Adding to automakers' burdens, U.S. President Donald Trump announced on Wednesday a 25% tariff on imported vehicles to the U.S. 

Germany was in the immediate firing line, said Gaurav Ganguly, director of economic research at Moody's Analytics.

"If the policy remains in place, the consequences for consumer confidence and employment in the auto sector and beyond are severe," Ganguly said.    

The gradual weakening of the labour market looks set to continue as recruitment plans in both industry and services keep coming down, said Carsten Brzeski, global head of macro at ING.

Furthermore, the number of bankruptcies has been increasing by low double-digit percentages since the summer of 2023, which will also push up unemployment.

"Today’s bankruptcy is tomorrow’s unemployment," Brzeski said.

(Reporting by Friederike Heine, Maria Martinez and Holger Hansen; Editing by Ludwig Burger and Alex Richardson)