German unemployment hits 12-year high as chancellor pledges economic revival

Germany’s unemployment surged past 3 million in January 2026, marking the highest level in more than a decade, prompting Chancellor Friedrich Merz to declare that boosting the economy would be his government’s top priority this year.

Labour Office data released on January 30 showed that 177,000 more people were out of work compared with December, bringing the total to 3.08 million and pushing the unemployment rate up to 6.6% in seasonally unadjusted terms, Reuters reports.

“The rise in the number of unemployed to more than three million is an alarm signal,” Merz wrote on social media platform X. “The economic upturn must be this year’s central priority.”

Labour Office director Andrea Nahles acknowledged the challenges facing the jobs market, noting, “There is currently little momentum in the labour market. At the start of the year, unemployment rose markedly for seasonal reasons.” When adjusted for seasonal trends, the number of unemployed remained virtually unchanged from December at 2.976 million, with a stable seasonally adjusted jobless rate of 6.3%.

Despite the unemployment surge, Germany’s economy shows signs of resilience. Gross domestic product grew 0.3% in the fourth quarter of 2025 compared with the previous three months, slightly surpassing expectations of 0.2%. On an annual basis, GDP expanded 0.2%, confirming preliminary figures.

Inflation in Germany also edged up in January, rising to 2.1% year-on-year from 2.0% in December. Core inflation, excluding food and energy, increased to 2.5% from 2.4%. Analysts said the slight uptick was largely driven by food prices and is unlikely to raise immediate concerns at the European Central Bank.

Economy Minister Katherina Reiche emphasized the need for Germany to develop new “growth engines,” warning that traditional export strengths “no longer carry our growth.” Carsten Brzeski, global head of macro at ING, highlighted the risks of complacency, urging structural reforms.

Meanwhile, Germany recently signed a clean energy pact with Britain, Denmark, and other European nations at the North Sea Summit in Hamburg, signaling a strategic shift toward sustainable growth.

Joerg Kraemer, chief economist at Commerzbank, cautioned that the government’s fiscal stimulus may take time to impact the economy. “The vast majority of companies do not believe in the long-awaited restart in economic policy,” he said.

By Vafa Guliyeva