Only 3 German states to create jobs in 2027

Only three of Germany's 16 states are expected to report employment growth in 2027, according to a forecast by the Institute for Market and Employment Research (IAB), cited by Reuters. At the national level, the number of employed people in Germany is expected to decline by 140,000 next year.

The forecast comes against the backdrop of an expected recovery in the German economy. The IAB predicts GDP growth of 1.2% in 2026 and 1% in 2027. However, the improvement in economic activity will not automatically lead to more jobs, as demographic changes limit the number of people who can be included in the labor market.

Employment declines despite economic growth

According to the IAB, socially insured employment will decrease by 70,000 people in 2026 to 34.89 million people. A further decline of 40,000 people to 34.85 million is expected for 2027. The decline will mainly affect full-time jobs.

“There are no clear improvements, but with a stable economy, the rise in unemployment is likely to end“, says Enzo Weber, head of the research department for forecasting and macroeconomic analysis at the IAB.

The number of unemployed is expected to increase by 50,000 people in 2026 and by another 20,000 people in 2027. Part of the projected increase is also related to changes in the rules for assessing the possibility of starting work, due to which more parents receiving social benefits will be counted as unemployed.

Industry loses ground, public services hire

The strongest pressure is expected on the manufacturing sector. The IAB predicts a decline in employment of 160,000 people in 2026 and another 130,000 in 2027. The reasons are related to structural changes in the economy, uncertainty in foreign trade, US customs policy and geopolitical conflicts.

At the opposite pole are the public sector, education and healthcare. There, 170,000 additional jobs are expected in 2026 and another 150,000 in 2027. The main drivers are the expansion of childcare and the aging population.

Regional differences are already visible. In 2026, growth in social security employment is expected in Hamburg, Lower Saxony, North Rhine-Westphalia and Brandenburg, while a decline is predicted in 10 of the 16 states. For 2027, positive dynamics are expected in only three provinces, indicating that the economic recovery will be unevenly distributed.