German Companies Continue Job Cuts Amid Weak Industrial Outlook for 2026

German companies are increasingly cautious about hiring, with most sectors planning workforce reductions as the country approaches 2026. According to data from the ifo Institute, the employment barometer dropped to 91.9 points in December 2025, its lowest level since May 2020, underscoring the persistent challenges facing the labor market. Klaus Wohlrabe, head of surveys at the ifo Institute, explained that the weak economy continues to weigh heavily on employment prospects, particularly with a gradual reduction in jobs centered in the industrial sector.

Nearly all industries are cutting jobs, with clothing manufacturers leading the declines. The service sector also remains hesitant, reflected by a further drop in the employment barometer. Retail companies are poised to reduce their workforce in the coming year. However, the construction sector holds mixed expectations, with the main construction industry aiming to maintain current staffing levels. In contrast, the tourism industry and consulting firms anticipate increased hiring in 2026.

Despite these labor market pressures, the German economy is expected to experience slight growth in the coming year, supported by a substantial €500 billion government debt package. Nonetheless, a recent survey of thousands of companies by Munich economists highlights that nearly all industrial sectors plan to continue cutting jobs over the next months, signaling ongoing headwinds.

This cautious hiring and persistent job reduction particularly in manufacturing reflect years of industrial sector weakness that have eroded employment opportunities. While some service-oriented industries show optimism, the overarching labor market outlook remains restrained by economic uncertainty and sectoral disparities.