Economics
Unemployment in Germany Rises in 2025: Eastern Germany Particularly Affected
The IAB study shows that unemployment in Germany will rise in 2025, with East Germany being particularly affected, further complicating the economic recovery of the Eurozone.
The unemployment rate in Germany is expected to increase next year, according to a recent study by the Institute for Employment Research (IAB) in Nuremberg. While unemployment in West Germany is expected to rise by 0.1 percentage points to 5.7 percent, an increase of 0.2 percentage points to 7.6 percent is forecast for East Germany. This development reflects the persistently weak economy affecting all federal states.
The economic environment remains uncertain," explained IAB expert Rüdiger Wapler. "A faster recovery in consumption and a stronger foreign trade could bring positive effects. If trade conflicts escalate or geopolitical tensions continue to increase, the development in regional labor markets could worsen." Thuringia, Mecklenburg-Western Pomerania, Saxony, and Bavaria are particularly hard hit, with the largest relative increases in unemployment numbers. In contrast, Lower Saxony, Bremen, and North Rhine-Westphalia record the smallest increases.
The IAB expects employment growth of 0.6 percent in western Germany, while employment is expected to stagnate in eastern Germany. In cities like Hamburg, North Rhine-Westphalia, and Hesse, employment subject to social insurance contributions will increase the most, while significant declines are noted in Thuringia and Saxony-Anhalt.
The reasons for the different development lie in the regional economic structure and the adaptability of the labor markets. While West German regions benefit from a diversified industrial sector, East German states struggle with less dynamic economic branches and a higher dependency on certain industries.
Simon MacAdam, economist at Capital Economics, emphasized: "European households have lost their wealth gains from the corona months and are increasingly investing in the housing market. Higher salaries have not yet boosted confidence and spending." Additionally, the escalating conflicts in the Middle East contribute to economic uncertainty, as Europe is more dependent on energy imports from the region.
The OECD forecasts that the harmonized household savings rates in Germany and the Eurozone will remain above pre-pandemic levels until at least 2025. This could further restrain consumer spending and hinder economic growth.
