The employment count in Germany saw a marginal growth of approximate 10,000 individuals during the second quarter
Stagnation in Germany's Labor Market: Q2 2022 to Q2 2025
Germany's labor market has experienced a period of stagnation, with only a slight increase in employment, from Q2 2022 to Q2 2025. This trend is attributed to a combination of economic, structural, and sectoral challenges.
According to the Federal Statistical Office, around 46 million people were employed in Germany in the second quarter of 2023. However, the employment growth rate in this quarter was significantly lower than it was in the same quarter of the previous year. The employment increase was only measurable in numbers, not percentages, with a total of 10,000 more employed people compared to the same quarter of 2022.
In the service sectors, employment increased by 178,000 people or 0.5% compared to the previous year's quarter. This growth was higher than the decline in the manufacturing sector, where the number of employed people decreased by 141,000 or 1.7%. The employment decline in the construction industry was smaller, with a decrease of 21,000 or 0.8%.
The employment growth in the service sectors was higher than the decline in the manufacturing sector, offering a glimmer of hope amidst the stagnation. However, the employment growth rate in the second quarter of 2023 was the lowest since the peak in the second quarter of 2022.
The stagnation in the labor market can be attributed to several factors. Economic slowdown and structural weaknesses have played a significant role, with Germany’s GDP contracting by 0.3% in Q2 2025. This contraction was driven mainly by weak industrial production, subdued exports, and the impact of ongoing trade disputes and tariffs with the U.S.
Trade conflicts and external uncertainties have also contributed to the stagnation. Continued U.S.-EU tariff disputes have created uncertainty for export-dependent industries, leading to low order books and reduced corporate investment.
Sectoral shifts and labor market mismatch have also been key factors. While some sectors, such as defense and infrastructure, are seeing stimulus-driven momentum, traditional industries like manufacturing and export-oriented sectors suffer from low capacity utilization and weak production. Apprenticeships and vocational training have also declined, weakening the pipeline for skilled labor.
Slowing wage growth and a sluggish labor market are expected to soften private household consumption, reducing domestic demand and employment growth opportunities.
Experts advocate for bold investment in innovation, vocational training, and sectoral shifts towards higher productivity and future-oriented industries to reverse this trend and avoid long-term damage. The labor market stagnation reflects a broader economic malaise shaped by global trade uncertainties, structural economic weaknesses, and slow adaptation to digital and green transformations.
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