Germany recorded highest unemployment rate for 2025 in over decade

Unemployment in Germany climbed to its highest level in more than a decade in 2025, setting a difficult tone for the year ahead in Europe’s largest economy.

The average number of people out of work last year rose by 161,000 to 2.948 million, marking the highest annual total since 2013. By the end of 2025, around 2.9 million people were unemployed, according to figures released this week by the Federal Employment Agency. As German media outlets recall, the three-million threshold was crossed for the first time in ten years last August.

While labour market conditions may have bottomed out, any improvement is likely to be slow. A noticeable easing in unemployment is not expected before the middle of the year at the earliest, said Andrea Nahles, head of the labour office.

“2026 is not a year of the all-clear, but a year with noticeable challenges,” Nahles said. She added that even a moderate recovery, supported by government fiscal packages and a rebound in the construction sector, would not be sufficient to drive a sharp decline in joblessness.

Germany’s labour market has been under growing strain for several years. Over the past four years alone, unemployment has increased by around 500,000 people, according to Carsten Brzeski, global head of macro at ING.

“This gradual worsening reflects textbook economics: with the economy effectively stagnating for more than five years and industry facing severe structural challenges, a deterioration in the labor market was inevitable,” Brzeski said.

Economic weakness continues to weigh heavily on hiring. In December, the labor office recorded 619,000 job vacancies, a drop of 35,000 compared with the same period a year earlier. The unemployment rate for 2025 stood at 6.3%, up from 6.0% in 2024.

“The gradual deterioration of the German labour market is likely to persist, clearly complicating any recovery of private consumption in 2026,” Brzeski said.

Despite the rising number of people without work, Germany continues to face a shortage of skilled labour. Demographic pressures are expected to further tighten the labour supply, with the country’s potential workforce set to shrink for the first time.

Labour Office estimates show that the number of available workers will fall by about 40,000 in 2026 due to demographic factors alone.

“Rising unemployment does not mean that we don’t need skilled workers,” Nahles said. “Nothing, I emphasize nothing, protects against unemployment better than good qualifications.”

Nahles also pointed to progress in integrating refugees into the labour market. Syrian refugees, in particular, have seen strong employment outcomes, with the integration rate among Syrian men exceeding that of a comparable German group. However, she acknowledged that challenges remain, especially when it comes to improving labour market participation among Syrian women.

The employment situation for Ukrainian refugees has also continued to improve. Around 370,000 Ukrainians were working in Germany by the end of 2025, an increase of 79,000 compared with a year earlier, underscoring gradual gains in labour market integration despite the broader economic slowdown.

By Nazrin Sadigova