Berlin: Unemployment in Germany rose above three million, the highest level in ten years, underlining the country’s fragile economic outlook despite Chancellor Friedrich Merz’s massive government investment programs.
The Federal Labour Office reported that 3.02 million people were out of work in August on an unadjusted basis, an increase of 46,000 from July. The seasonally adjusted jobless rate held steady at 6.3 percent, in line with expectations, but analysts said the symbolic threshold of three million was a warning sign.
“In Germany, three million is not just a number. In the context of the labour market, it represents a symbolic threshold – one that separates strength from weakness,” said Carsten Brzeski, global head of macro at ING.
The figures reflect persistent economic weakness, exacerbated by global uncertainties, supply chain disruptions, and the fallout from Russia’s war in Ukraine. Labour demand is also slowing, with the number of vacancies falling to 631,000 in August – 68,000 fewer than a year earlier.
Inflation added to the gloom, climbing to 2.1 percent in August from 1.8 percent in July, according to preliminary data from the federal statistics office. Meanwhile, retail sales plunged 1.5 percent in July compared with June, far worse than the 0.4 percent decline, raising concerns about consumer confidence.
The government has announced a €500 billion ($585 billion) special fund for infrastructure and growth investments, after relaxing fiscal rules to stimulate the economy. Labour Minister Baerbel Bas stressed the need for countermeasures to address cyclical headwinds, while Merz said reforms were vital to restore growth and employability. “The rise in unemployment is not unexpected. However, the figure illustrates how necessary reforms are,” Merz said.
As U.S. trade tariffs continue to weigh on exports, hopes that domestic consumption could offset weaker foreign demand have been dashed. With unemployment rising and inflation accelerating, analysts warn that confidence may erode further unless reforms take hold quickly.
