Ifo Institute Reports Rising Job Cuts in German Industries Amid Weak Labor Market

The latest report by the ifo Institute reveals a concerning increase in job cuts planned by German companies, signaling a weakening labor market outlook. In June 2026, the ifo Employment Barometer fell to 92.3 points from 93.9 in May, marking one of the lowest levels observed since the COVID-19 pandemic began.

According to Klaus Wohlrabe, an ifo expert, "The labor market remains weak," highlighting that Germany is still far from achieving sustainable employment recovery. The industrial and retail sectors are particularly affected, with companies intending to cut jobs outnumbering those planning to create new positions by roughly 18 percentage points. While the industrial sector showed a slight improvement in the barometer, the trend toward job reductions still dominates. The retail sector experienced a more pronounced decline in employment confidence, with the barometer dropping by 3.2 points.

The service sector also faces difficulties; companies planning job cuts exceed those planning increases by 4.9 percentage points, representing a reversal from the previous month’s trend. Temporary employment agencies and the tourism industry continue to be areas of significant challenge. In contrast, the construction industry remains relatively stable, with minimal plans for workforce reductions.

Despite these labor market challenges, the broader German economic sentiment exhibits a slight improvement. The ifo business climate index increased marginally to 85.6 points in June from 85.0 in May, indicating cautious optimism amid the tougher employment outlook.

This data from the ifo Institute underscores the complex situation in Germany’s labor market, where growing job cut plans across key sectors coexist with a modestly improving economic climate. As companies recalibrate, the prospects for a sustained recovery in employment remain uncertain in the near term.