German employment hits new record in 2023

According to the Federal Statistical Office (Destatis), the German workforce reached 45.9 million in 2023, marking the highest number of employed individuals since the reunification of the country in 1990.

This figure surpassed the previous record set in 2022 by 0.7 percent. The COVID-19 pandemic in 2020 had halted a 14-year trend of increasing employment in Germany.

Destatis attributed the rise in employment to immigration of foreign workers, as well as an increase in the employment of individuals with German citizenship.

The growth in the workforce has counteracted the negative effects of demographic changes which are expected to lead to a decline in the working-age population in the future, according to Destatis.

While service sectors saw significant increases in employment, the manufacturing industry, excluding construction, only experienced a 0.3 percent rise in employment. despite this growth, leading economic institutes predict a slight contraction in Germany’s economy over the next two years.

The Organization for Economic Cooperation and Development (OECD) has forecasted growth rates of 0.6 percent and 1.2 percent for 2024 and 2025, respectively.

Despite the increase in employment, Germany continues to face a severe shortage of skilled workers in many professions, forcing the country to depend on immigration for its economic stability. As a result, the German government has reformed immigration laws to make it easier for qualified individuals to stay in the country.

However, the high employment levels may not be sustainable in the long term. The Kiel Institute for the World Economy (IfW Kiel) stated that they expect employment to peak soon and then begin to decline over the rest of the forecast period for 2024 and 2025.

The potential labor force is also expected to shrink due to aging, despite robust levels of immigration. The economic recovery in the next two years is projected to partly counteract this decline, according to IfW Kiel.