German Unemployment Rises Sharply, Exposing Strain on Economy

Germany’s job market took a heavier hit than expected in May, with the number of unemployed rising by 34,000 to 2.96 million in seasonally adjusted terms, data from the Federal Labour Office showed Wednesday. The increase far exceeded analyst expectations of a 10,000 rise and pushed the unemployment rate closer to the 3 million mark, a threshold last breached a decade ago.

Labour Minister Baerbel Bas called the figures a “clear signal” that Germany’s economy needs urgent stimulus measures to revive growth and prevent a deepening of the downturn.

The country’s economic struggles, driven by long-standing issues such as labor shortages and compounded by global trade tensions, have cast a shadow over Chancellor Friedrich Merz’s government. Merz has pledged to end Germany’s two-year economic slump, but recent developments, including the threat of steep U.S. tariffs announced by President Donald Trump, risk derailing those plans. If imposed, such tariffs could push Germany into a rare third consecutive year of recession — a scenario not seen in the country’s post-war history.

Despite the grim headline figures, there were glimmers of resilience in the labor market. Marc Schattenberg, economist at Deutsche Bank, noted that hiring intentions in the service sector remain a bright spot. “Especially if the trade conflict between the U.S. and the EU is resolved soon, the German economy could grow slightly again this year,” he said, adding that such a recovery would provide much-needed support to the labor market.

The seasonally adjusted unemployment rate held steady at 6.3% in May, matching forecasts from a Reuters poll and marking the highest level since December 2015, excluding the pandemic. Pantheon Macroeconomics predicts the rate could edge up further to 6.5% in the coming months as economic challenges persist.

Labour demand has also cooled noticeably. The number of job openings in May stood at 634,000, down 67,000 from a year earlier, highlighting a slowdown in hiring appetite.

As Germany’s economy struggles to regain momentum, the rising unemployment figures add to the sense of urgency for policymakers to deliver concrete measures that can stimulate growth, rebuild confidence, and stabilize the labor market.