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IAB Forecast: German Labor Market Flat in 2026 as East–West Divide Widens

The research institute points to a weak economy as the main drag on hiring.

Overview

  • Unemployment is projected to dip 0.4% in West Germany and rise 1.0% in the East, signaling no national turnaround.
  • Baden-Württemberg is expected to hold a 4.5% jobless rate with social-security employment edging up 0.1%.
  • Bavaria is projected to record the lowest unemployment at about 4.0%, while Bremen at 11.7% and Berlin at 10.4% remain highest.
  • Social-insurance employment is seen up 0.2% in the West and down 0.1% in the East, with Hamburg leading gains at 0.9% and Brandenburg at 0.5%.
  • Officials call for retraining, support for career changers and mobilization of underused labor pools, while warning that new trade conflicts or geopolitical tensions could weigh on outcomes.