German unemployment rises to highest in 12 years with challenging 2026 ahead

By Maria Martinez and Holger Hansen

BERLIN, Jan 7 (Reuters) - Germany had the highest number of unemployed in twelve years in 2025 and this year will continue to be challenging for Europe's biggest economy, the labour office said on Wednesday.

The average number of jobless in 2025 rose by 161,000 to 2.948 million, the highest annual figure since 2013, according to the labour office.

Although the trough has probably been reached, a slight easing is not expected until the middle of the year at the earliest, said labour office head Andrea Nahles.

"2026 is not a year of the all-clear, but a year with noticeable challenges," Nahles said, noting that a moderate recovery, supported by the government's fiscal packages and a rebound in construction, would not be enough for a significant fall in unemployment.

WEAK LABOUR MARKET TREND CLOSED THE YEAR

The number of people out of work in Germany rose in December but by less than expected, labour office figures showed.

The office said the number of unemployed grew by 3,000 in seasonally adjusted terms from the previous month. Analysts polled by Reuters had expected a rise of 5,000.

The seasonally adjusted jobless rate remained stable at 6.3%.

"The labour market continues to lack economic momentum," said Nahles. "The weak trend is therefore continuing at the end of the year."

Germany ended 2025 with 2.9 million people out of work, close to the three million mark which was topped for the first time in a decade in August.

"The bottom line is that the labour market is weaker than it was a year ago," said Nahles.

DIRE STATE OF THE ECONOMY LEAVES SCARS IN THE JOB MARKET

Over the last four years, German unemployment has increased by some 500,000 people, said Carsten Brzeski, global head of macro at ING.

"This gradual worsening reflects textbook economics: with the economy effectively stagnating for more than five years and industry facing severe structural challenges, a deterioration in the labour market was inevitable," Brzeski said.

Germany has been struggling with a persistently weak economy. There were 619,000 job openings registered with the labour office in December, 35,000 fewer than a year ago.

The unemployment rate in 2025 was 6.3%, up from 6.0% in 2024.

"The gradual deterioration of the German labour market is likely to persist, clearly complicating any recovery of private consumption in 2026," Brzeski said.

LABOUR SHORTAGES REMAIN DESPITE RISING UNEMPLOYMENT

The shortage of skilled workers remains a problem despite unemployment, however, and Germany's potential labour force is expected to decline for the first time.

The number of available workers will fall by a noticeable 40,000 in 2026 due to demographic factors, according to labour office estimates.

"Rising unemployment does not mean that we don't need skilled workers," said Nahles. "Nothing, I emphasize nothing, protects against unemployment better than good qualifications."

Nahles praised the integration of Syrian refugees into the labour market, with the integration rate of Syrian men higher than for the German comparison group.

However, there is still a deficit in the integration of Syrian women.

The situation among Ukrainian refugees has also improved, with 370,000 Ukrainians working in Germany, 79,000 more than a year ago.

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