Germany-based companies reduce workforce once more
In a troubling development for the German economy, job cuts are accelerating across various sectors, particularly in management, administrative, R&D, and the automotive industry. According to the Ifo Employment Barometer, German companies are increasing job cuts, with the barometer falling to 93.8 points in August.
The consultants, including EY, predict that this trend is likely to continue. The reasons for these job cuts are manifold, with significant profit losses, overcapacities, and weakening foreign markets being the primary culprits. Exports to China decreased by 14% in the second quarter compared to the previous year, and overall exports of German industrial companies shrank by 0.6%. German exports to the US fell by 10% in the same quarter.
The weak export market is a significant contributor to job cuts in the German industry. Ifo President Clemens Fuest believes that Germany is not innovative enough and needs targeted promotion of new ideas, technologies, and business models. He also points out that dismissal protection limits innovations.
In industry, there were more dismissals than new hires in all key sectors. The focus of job cuts is on management, administrative, and R&D functions. Retail is still cutting staff, but less so than before. Interestingly, the construction industry plans to keep the workforce largely constant.
On the other hand, temporary employment agencies are struggling with a lack of demand, while the tourism sector is experiencing brisk hiring. The number of unemployed people in Germany exceeded three million in August, the first time since February 2015.
Klaus Wohlrabe, head of Ifo surveys, stated that the labor market is not recovering from the crisis. However, he suggests that Denmark's Flexicurity approach, which combines low dismissal protection with good unemployment insurance, could be adopted for highly qualified employees in Germany. This could potentially stimulate innovation and growth in the industry.
Despite these challenges, it appears that job cuts in the German industry are not likely to abate soon. The consulting company that evaluated job cuts in the German industry in August 2021 remains unnamed in the provided search results. However, their findings underscore the urgency for targeted measures to support the German economy and safeguard jobs in these trying times.
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