A survey released Monday by the Institute for German Economy (IW) paints a concerning picture of the German labor market, suggesting ongoing challenges and potential job losses through 2026. The poll, encompassing 46 industry associations, reveals that a significant 22 predict workforce reductions within their sectors, a stark contrast to just nine anticipating growth. Fifteen associations anticipate stable employment levels, indicating a lack of robust and widespread optimism.
The pessimistic outlook is largely attributed to persistent, well-documented structural weaknesses within the German economy. Rising global protectionism continues to stifle export performance, a crucial pillar of the nation’s economic strength. Coupled with increasingly burdensome operational costs, this diminishes Germany’s price competitiveness on the international stage. Hardest hit are traditional industrial powerhouses – the automotive, paper and textile industries are among those bracing for production declines.
While a glimmer of hope emerges in improved business prospects compared to 2025, the recovery remains fragile. Nineteen associations forecast higher production volumes for the coming year, a positive shift against nine anticipating a downturn. This marks a first positive sentiment balance in several years, but the underlying resilience remains questionable.
Crucially, investment remains stubbornly subdued, reflecting deep-seated uncertainty. Only eleven industry associations foresee increased investment, while fourteen expect a reduction. A considerable 21 project stagnant investment levels, frequently at a low base. This hesitancy to invest signals a lack of confidence in sustained economic recovery and risks hindering future growth.
Benefiting from specific governmental interventions, such as special funds and increased defense spending, sectors like aerospace, shipbuilding and portions of the construction industry are expected to experience growth. The service sector also reports a relatively improved situation compared to the previous year.
“Anyone hoping for a swift and comprehensive resolution to the economic crisis will be disappointed in 2026” cautioned IW Director Michael Hüther. He emphasized that the partial improvement often masks a lack of genuine economic dynamism. “The German economy is stabilizing at a lower level” he stated, directly challenging the narrative of a strong rebound. Hüther’s assessment underscores the considerable task facing policymakers to implement reforms and initiatives that can truly reignite sustainable and broad-based economic growth and avoid a prolonged period of stagnation. The survey highlights a need for urgent policy action to address the underlying structural issues and foster a climate conducive to long-term investment and job creation.
