Businesses in Germany are struggling with the cost of rehiring staff post-pandemic, with profit margins still hit by low revenues, higher inflation, interest rates, and a continuing high cost of living.
The number of people in Germany without a job rose to 2.762 million in May, according to the newly released unemployment rate report for May.
That was a jump of 25,000, and much more than the 10,000 predicted. It is the 17th month in a row that unemployment has risen and the jobless total continues to hover near three-year highs.
Meanwhile, the seasonally adjusted jobless rate was 5.9% last month, the same level for the sixth month in a row in line and in line with analyst expectations.
This was the sixth month in a row that the unemployment rate was at this level, which was in line with analyst expectations.
According to Statista, German unemployment averaged 5.7% in 2023, with numbers having mainly fallen since 2005. Germany therefore has had historically relatively lower levels of unemployment than other European countries.
However, since the pandemic, unemployment numbers have started to creep up, with most businesses having to lay off employees, and several companies closing down.
In turn, fewer employees has meant lower productivity for businesses, leading to less turnover and investor interest.
Even businesses considering rehiring following the pandemic have been by higher inflation and cost of living increases, including soaring energy prices. That has dealt repeated blows to profit margins.
Another key reason German unemployment is rising is because of the sharp rise in new part-time and low-wage jobs.
German construction sector sees the worst brunt of layoffs
Labour-intensive sectors such as the German construction and house-building sectors have seen the brunt of layoffs, as projects halted during the pandemic have been further postponed or abandoned.
The tightening of house-housebuilding laws, such as the Building Energy Act, has also contributed to companies putting more projects on hold. This is because this act, a new German heating law, calls for all new building heating systems to use at least 65% renewable energy, which adds to builders’ costs.
With new orders lagging post pandemic, the German building industry simply does not have enough business in the pipe line to rehire workers.
White collar businesses have also been affected by the economic climate. Deutsche Bank in February announced it would be slashing 3,500 jobs over the next two years.
Similarly, chemicals producer BASF also in February revealed a cost cutting plan, which involved closing several underperforming sites, reducing costs and cutting about 2,600 jobs in Europe. A significant number of these jobs were likely to be at its Ludwigshafen headquarters and site, it said.
