The Institute for Employment Research (Institut für Arbeitsmarkt- und Berufsforschung — IAB) has released its macroeconomic labor market forecast for Germany for 2026 and 2027. According to researchers, despite a gradual recovery from economic stagnation and stabilizing business conditions, overall employment in the country is entering a decline driven by demographic trends.
Analysts anticipate that the annual average number of employed persons (Erwerbstätige) will decrease by 210,000 in 2026 and by an additional 140,000 in 2027.
- What happened: The IAB presented an analytical report on German labor market trends for 2026–2027.
- Core figures: Employment to fall by 210,000 in 2026 and 140,000 in 2027; labor force potential to shrink by 70,000 and 140,000 persons respectively.
- Sectoral breakdown: Manufacturing employment is projected to contract by 160,000 jobs in 2026, while public services, education, and healthcare will expand by 170,000 positions.
Demographic Drag and Shrinking Labor Force Potential
Following an extended phase of sluggish economic activity, the German economy is returning to growth: IAB experts forecast real gross domestic product expansion of 1.2% in 2026 and 1.0% in 2027. While exports and government fiscal packages bolster momentum, demographic shifts are constraining labor supply.
Coupled with subdued net immigration (Nettozuzug), the IAB projects that Germany’s labor force potential (Erwerbspersonenpotenzial) will contract by 70,000 persons in 2026 and by 140,000 in 2027.
Enzo Weber, Head of Forecasts and Macroeconomic Analysis at the IAB, emphasized the historic milestone of this trend:
“2026 will mark the first year since the 2009 global financial crisis that employment subject to mandatory social security contributions ceases to grow.”
According to the IAB, the decrease in this group of workers is concentrated entirely in full-time jobs. Total employment is also declining due to fewer self-employed individuals and fewer workers in marginal part-time employment (Minijob).
The institute estimates that the number of employees subject to social security contributions (sozialversicherungspflichtig Beschäftigte) will drop by 70,000 in 2026 (to 34.89 million) and by another 40,000 in 2027 (to 34.85 million).
Unemployment Dynamics and Sectoral Divergence
Registered unemployment is projected to rise by 50,000 persons in 2026 and by 20,000 in 2027. Researchers note that part of this statistical uptick is attributable to revised job acceptability criteria (Zumutbarkeitsregeln), causing more parents caring for children and receiving benefits to be formally classified as available jobseekers.
Sectoral trajectories diverge markedly:
- Manufacturing (Produzierendes Gewerbe): Amid structural transformation, foreign trade uncertainties, and geopolitical conflict in the Middle East, manufacturing employment is forecast by the IAB to drop by 160,000 workers in 2026 and by 130,000 in 2027. The institute expects increased defense expenditures to benefit defense contractors and supplier industries.
- Public services, education, and healthcare: This sector group is projected to add 170,000 jobs in 2026 and 150,000 in 2027. The IAB attributes this primarily to expanded childcare infrastructure and an aging population.