Germany is expected to face a severe industrial employment crisis in 2026, despite signs of improvement in parts of the services sector, according to a new study released on Monday by the German Economic Institute in Cologne.
The report suggests that employment prospects for next year remain bleak, particularly in manufacturing, which continues to underpin Europe’s largest economy and remains central to the government’s recovery strategy.
Only eight professional associations surveyed expect employment growth in 2026, while 22 anticipate job cuts and 15 predict economic stagnation. As a result, overall expectations remain negative, even though the outlook has marginally improved compared with the previous year.
The industrial sector is under the greatest strain, with most manufacturing branches forecasting workforce reductions in 2026. Key industries such as automotive manufacturing, chemicals, machinery and equipment are among those expecting the sharpest declines in employment.
In contrast, the study points to job growth in pharmaceuticals, aerospace, shipbuilding and marine technology, offering limited areas of optimism within Germany’s broader industrial landscape.
According to the Agence France-Presse, after three years of economic stagnation the German government launched a large-scale public investment program in May, valued at hundreds of billions of euros. The package includes corporate tax reductions, a high-technology development agenda and plans to cut energy costs by €10 billion starting in 2026.
Government officials say these measures are beginning to have an impact. Analysts at the German Economic Institute report improving prospects in sectors such as construction and security technology, both of which are closely tied to public investment spending.
However, Germany’s industrial core continues to lose jobs at a significant pace. Data from consultancy EY show that 120,300 industrial jobs were lost over the past year alone, a decline of 2.2 per cent. Since 2019, the sector has shed around 272,000 jobs, representing a reduction of nearly 4.8 per cent.
The automotive industry has been the hardest hit, with 48,800 jobs cut in a single year, accounting for more than six per cent of the sector’s workforce. Major manufacturers such as Volkswagen and Bosch are expected to eliminate tens of thousands more positions by 2030.
Economists warn that no near-term recovery is expected for industrial employment.
The downturn is being driven by structural challenges including geopolitical and trade tensions, fragile supply chains, limited access to critical raw materials, the push to decarbonize energy-intensive industries and the automotive sector’s transition to electric vehicles. These factors continue to weigh heavily on investment and hiring decisions.
Meanwhile, employment in the public sector and services continues to expand, particularly in healthcare and security, reflecting Germany’s ageing population. However, researchers stress that this growth is not sufficient to compensate for the scale of job losses in the industrial sector.
The findings highlight growing concerns about the long-term balance of the German economy, as industrial employment shrinks while service-sector jobs continue to rise.
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