Decline in Manufacturing Workforce Reaches 141,000 in the Second Quarter
In recent times, the German manufacturing sector has been grappling with a series of difficulties that are impacting employment and exports. According to Commerzbank chief economist Jörg Krämer, these challenges could exacerbate the trend towards deindustrialization in Germany.
The sector has seen a significant drop in employment since 2019, losing 217,000 jobs (3.8% drop). The automotive, mechanical engineering, metal, and chemical industries have been particularly hard-hit. This trend reflects a broader weakening in manufacturing employment, partly due to a looming skilled labor exodus and competitiveness losses linked to the energy crisis and regulatory challenges from the EU level.
Despite a modest increase in the Manufacturing PMI in August 2025, indicating a sector edging closer to stabilization, export sales have shown a slight decline for the first time in five months. The ongoing US-China trade war, new US import tariffs, and geopolitical tensions have contributed to this cautious outlook for foreign trade.
Input cost inflation has eased, assisted by falling oil prices and a strong euro. However, competitive market conditions limit producers' ability to pass on savings to customers, leading to reduced factory gate charges and ongoing pricing pressure.
The overall economy remains fragile, with Germany’s GDP showing a slight contraction in Q2 2025. The sustainability of any economic rebound depends on fiscal policy effectiveness, resolution of trade tensions, and domestic consumption.
Despite job losses in manufacturing, Germany overall still experiences high demand across industries, with 1.17 million open vacancies reported in March 2025, indicating labor shortages and structural adjustments in the job market.
The decline in employment in the German manufacturing sector may have ripple effects on related industries and the economy as a whole. The USA, being the most important customer for the export-dependent German industry, is also affected by the trade tensions. US President Donald Trump has imposed 15% tariffs on imports from the European Union, affecting the German industry.
The population in the working-age population is likely to decrease noticeably in the coming years, as predicted by Jörg Krämer. This demographic shift could further complicate the efforts to revitalize the manufacturing sector.
Despite these challenges, wages will continue to rise, as predicted by Jörg Krämer. However, he does not see a restart in the fight against bureaucracy under the new government. The decline in employment in the German manufacturing sector could potentially impact the overall employment rate in the country.
In conclusion, the German manufacturing sector is facing job losses and export difficulties driven by global trade tensions, energy costs, regulatory burdens, and shifting competitiveness. The overall economy remains fragile, making the recovery of manufacturing jobs and export growth uncertain.
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