3 Little growth in labour market
The labour market remained relatively stable despite the sluggish economic recovery. Employment rose moderately in the second quarter of 2024. However, the rise was not powerful enough to fully absorb the migration-driven growth of the labour force. Accordingly, the number of unemployed also rose slightly. The persistent weakness of the economy was also reflected in a moderate increase in short-time work and a gradual decline in the number of vacancies. Little is likely to change in this respect in the short term.
Germany’s working population increased slightly in the second quarter. On average, the seasonally adjusted number of employed persons was up by 54,000 compared with the first quarter of 2024, an increase of 0.1 %. 5 The declining trend in self-employment – which has persisted for some time now – continued, and there was barely any change in purely low-paid part-time employment. Job growth was primarily attributable to jobs subject to social security contributions.
At the same time, the two-speed developments across sectors evident in previous quarters continued. As a result of demographic change and the transformation of energy supply, it is above all the areas of basic public services that have benefited from increased demand for employees subject to social security contributions. These include health and social services, the public sector, the education sector, and energy and water supply. The level of employment was likewise higher than in the first quarter in a number of other services sectors, particularly accommodation and food services 6 along with qualified business services.
The weakness of the economy, which dates back more than two years now, is having an impact on demand for labour, above all in the manufacturing and construction sectors. To start with, the core workforces were largely retained, with any adjustments effected through the reduced use of temporary agency work. But for the last year or so, the number of employed persons subject to social security contributions has also been declining in both these sectors of the economy. That said, the decline has been moderate as, even within manufacturing, a number of sectors are doing well and building up headcount. Disaggregated sectoral data is only available up until the end of 2023. This shows that headcount increased substantially over the course of 2023 by between 2½% and 5 % in the manufacture of data processing equipment and electronics, other transport equipment, the repair and installation of machinery, and pharmaceutical goods. In addition, there was a notable increase in employment in mechanical engineering. By contrast, energy-intensive sectors of the economy experienced job losses to a certain degree. Furthermore, employment declined noticeably last year in the manufacture of metal products, rubber and plastic goods, as well as in a number of consumer-related industries. This is likely to be down to structural as well as economic reasons. In the manufacturing sector in particular, short-time work is additionally being used as an adjustment instrument to bridge periods of weak demand. In April, 2.8 % of all manufacturing employees subject to social security contributions were affected by this phenomenon. Short-time work was virtually non-existent in the rest of the economy.
Registered unemployment once again increased slightly. In the second quarter, an average of 2.76 million persons were unemployed when viewed on a seasonally adjusted basis, or around 46,000 persons more than in the first quarter of 2024. The unemployment rate remained unchanged at 5.9 %, partly because of an increase in the number of people in work. In July, the ranks of the unemployed were swelled by a further 18,000 people compared to the previous month, taking the unemployment rate to 6.0 %. The increase of recent months is primarily attributable to more people covered by the statutory unemployment insurance scheme, which is influenced by cyclical factors. By contrast, refugees from Ukraine – most of whom would receive the basic welfare allowance – made virtually no contribution to the rise in unemployment. Here there has been progress in labour market integration, with the number of people moving into employment having improved noticeably in recent months.
According to the leading indicators, the next few months are unlikely to dispel the sluggishness of labour market developments. The IAB employment barometer for the overall economy remains in slightly positive territory. This points to a slight increase in employment in keeping with developments over recent months. Although the recruitment plans of trade and industry for the next three months – as ascertained by the ifo Institute in its surveys – have shown signs of bottoming out for some months now, they remain slightly in the negative zone. Both apply to the manufacturing sector in particular. In trade, the negative trend development of the corresponding leading indicator has yet to be broken. By contrast, service providers (excluding trade) are intending to increase headcount slightly overall. The number of vacant positions reported to the Federal Employment Agency continues to decline. In particular, growth in newly posted job offers is extremely weak. As firms have largely refrained from letting staff go during the prolonged phase of economic weakness, the need to recruit is not great. Although the aggregate job supply as gleaned by the IAB through company surveys has likewise declined over the last few quarters, it remains at an extremely high level in a historical comparison. Just like the significant amount of time it takes for vacant positions to be filled, this points to persistent difficulties in recruitment, as well as relatively tight conditions in at least some labour sub-markets for certain specialist personnel. Where the number of unemployed is concerned, the increase may at least slow down. The IAB unemployment barometer has recovered somewhat recently but remains just in negative territory.