Workforce Pulse Amid Economic Recession
By Stephan Lorz
Temporary Work History Report
The ongoing economic recession is casting a shadow on the labor market. Superficial symptom-treating and inconsistent politics are taking their toll.
At first glance, it appears paradoxical: Germany's labor market has achieved an unprecedented peak in employment once more, averaging around 46.1 million employed individuals in 2024 - the highest number since reunification. However, the economy is also grappling with a recalcitrant recession. Various long-standing issues such as escalating energy costs, rising tax burdens, inflated labor costs, delayed investments, and hindered climate transformation are exacerbating the situation. The wave of dismissals in the manufacturing sector is already underway, leaving only service providers holding steady. Concurrently, many companies are delaying workforce adjustments due to challenges finding skilled labor. The future may present additional hurdles as demographic trends complicate matters.
The service sector, which employs 75.5% of all workers, has been the driving force behind employment growth, curtailing losses in manufacturing and construction [2][3]. Employment within the public sector remains stable, serving as a bulwark against broader unemployment [3]. The rise of part-time work - accounting for 31% of all employment (50% among women) - reflects adaptable labor practices that facilitate worker participation despite challenging economic conditions [2]. Furthermore, the decline in temporary employment, such as a decrease of 107,000 year-over-year in early 2025, suggests a shift towards more permanent service roles [1][3].
Germany's 3.5% unemployment rate (late 2024) mirrors EU employment peaks, which are rooted in labor force participation gains rather than robust economic expansion [4]. This implies employment resilience may stem from broader regional trends, including post-pandemic labor market adjustments. Sectoral disparities persist, however, with industrial productivity growing 30% in 2010-2020, only to be counterbalanced by healthcare and education hiring [5][3]. Efforts towards reforming labor and welfare structures aim to address these challenges while ensuring continued employment stability [3].
Employment statistics may lag behind GDP declines, as firms initially opt to retain workers during short-term economic downturns. The persistence of structural weaknesses, including energy costs and geopolitical risks, has yet to yield widespread layoffs [3][5].
In essence, Germany's employment resilience can be attributed to service-sector growth, labor market flexibility, and postponed recessionary impacts. As industrial contraction and structural challenges persist, it remains to be seen how the labor market will navigate this period and emerge on the other side.
- Stephan Lorz's article highlights the paradoxical situation in Germany, where the economy is in recession despite achieving an all-time high of 46.1 million employed individuals, indicating the presence of a recession despite the robust labor market.
- The ongoing recession, fraught with issues such as escalating energy costs, rising tax burdens, and delayed investments, is worsening the situation, leading to a wave of dismissals in the manufacturing sector while the service sector continues to employ the majority of workers.
- The resilience of Germany's employment can be attributed to factors like the service sector's growth, labor market flexibility, and delayed impacts of the recession, but the future may present additional hurdles due to demographic trends and sectoral disparities, such as the slow growth in industrial productivity compared to sectors like healthcare and education.
- Despite the labor force participation gains contributing to low unemployment rates similar to EU peaks, structural weaknesses, including energy costs and geopolitical risks, could potentially lead to widespread layoffs in the future, underscoring the need for reforms in labor and welfare structures to address the challenges and ensure continued employment stability.
