The Institute for Employment Research (IAB) has released data suggesting a subtle weakening in the German labor market, raising concerns about the pace of economic recovery and prompting renewed scrutiny of industrial policy. The IAB’s Labor Market Barometer, a key indicator tracked by economists and policymakers, edged downwards to 100.1 points in December 2025, registering a decline of 0.3 points. This places the barometer only marginally above the neutral mark, signaling a slowdown in previously observed positive trends.
Specifically, the barometer’s unemployment prediction component registered a decrease of 0.2 points, settling at 99.9 points. This suggests a lack of a clear directional trend in unemployment figures, a particularly sensitive metric given the lingering effects of a three-year recession. Simultaneously, the employment component also saw a marginal decline, dropping 0.3 points to 100.3.
Enzo Weber, head of forecasting and macroeconomic analysis at the IAB, characterized the current situation as one of “no contraction, but insufficient for growth”. While Weber acknowledged the overall stability in employment figures – a resilience observed even after three years of economic downturn – he emphasized the ongoing contraction within the industrial sector. He argued that a fundamental shift in this trend requires “radical renewal” a tacit criticism of current industrial strategies and a potential call for significant investment and structural reform.
The data triggers a political debate about the government’s approach to supporting industry. Critics argue that current measures haven’t been aggressive enough to stimulate innovation and competitiveness, particularly in the face of global economic headwinds. The IAB’s report is likely to fuel pressure on policymakers to develop a more robust and comprehensive plan to revitalize the industrial base and secure long-term employment prospects for German workers. While stability is welcome, the marginal decline across key indicators underscores the fragility of the recovery and the urgent need for decisive action.
