German Unemployment Hits 12-Year Peak as Economic Stagnation Persists
Nuremberg, Friday, 9 January 2026.
While German unemployment surged to a twelve-year high of nearly 3 million, officials signal the worst may be over, suggesting the labor market slump has finally reached its bottom.
A Year of Structural Stagnation
The Federal Employment Agency (BA) released data on Wednesday, January 7, 2026, confirming that the German labor market has suffered its most difficult year in over a decade [1]. Throughout 2025, the average number of unemployed individuals rose by 161,000 to reach 2.948 million, marking the highest annual figure recorded since 2013 [1]. The year concluded on a somber note, with unemployment figures in December 2025 climbing by 23,000 from the previous month to hit 2.908 million [4][5]. While a rise in unemployment is typical during the winter months due to reduced activity in sectors like construction and agriculture, the year-over-year comparison reveals a deeper trend: the December figure represents an increase of 101,000 jobless individuals compared to December 2024 [4][5]. Consequently, the unemployment rate for December ticked up by 0.1 percentage points to 6.2 percent [4], contributing to an annual average rate of 6.3 percent for 2025, up from 6.0 percent the previous year [1].
The Economic Reality Check
This deterioration in the labor market is not merely a statistical fluctuation but a reflection of broader economic inertia. Carsten Brzeski, global head of macro at ING, describes the situation as “textbook economics,” noting that with the German economy effectively stagnating for more than five years and the industrial sector facing severe structural challenges, a weakening labor market was inevitable [1]. The industrial slowdown has been particularly acute, with the automotive sector and broader industry shedding approximately 140,000 jobs [2]. This lack of economic momentum is evident in the demand for labor; in December 2025, there were 619,000 registered job openings, a decline of 35,000 compared to the year prior [1]. Brzeski warns that this gradual deterioration is likely to persist, complicating any potential recovery of private consumption in 2026 [1].
Signs of a Bottom Amidst Seasonal Headwinds
Despite the grim annual statistics, officials at the Federal Employment Agency see tentative signs that the worst of the downward spiral may be stabilizing. Andrea Nahles, head of the BA, stated that while the labor market lacks economic momentum, there are indications that the “bottom has been reached” [2][5]. However, she cautioned that 2026 will not be a year of the “all-clear” but rather one of continued challenges [1]. Nahles forecasts that unemployment will likely surpass the three-million mark again at the beginning of 2026, driven by seasonal factors [2]. A slight easing of the labor market is not expected until mid-2026 at the earliest [1][7]. Furthermore, a significant skills mismatch remains a hurdle; Nahles highlighted that while four-fifths of current vacancies are for skilled workers, half of the unemployed population is qualified only for helper positions [2].