One in three companies (36 percent) is planning to reduce its workforce in the coming year, with only 18 percent expecting to create new jobs, according to the latest economic survey from the employer-friendly Institute of German Business (IW).
The study surveyed nearly 2,000 companies across the country, spanning all major sectors, and found that the situation is particularly acute in industry, where 41 percent of firms anticipate job cuts.
“Companies are suffering from major geopolitical stress,” explained IW economic expert Michael Grömling, summarising the mood among German employers.
But some regions – and some sectors – fare better than others.
Where the most jobs are expected to be added (or cut)
Despite the overall pessimism, the study reveals significant regional differences in job prospects for 2026.
Bavaria and the northern states – Schleswig-Holstein, Lower Saxony, Hamburg, and Bremen – stand out as the only regions where companies, on balance, expect to increase production and, by extension, maintain or even expand employee numbers.
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The outlook is far less rosy elsewhere.
In the northeast – including Mecklenburg-Western Pomerania, Brandenburg, Saxony-Anhalt, and Berlin – almost half of companies expect a decline in production, and only 17 percent anticipate better business conditions in 2026.
North Rhine-Westphalia, Baden-WĂĽrttemberg, the southwest (Hesse, Rhineland-Palatinate, Saarland), and the southeast (Saxony and Thuringia) also report predominantly negative expectations, with more firms planning to cut jobs than to hire.
Sectoral differences
The IW survey also highlights marked differences between sectors.
The manufacturing and industrial sectors appear to face the bleakest outlook: 41 percent of companies in these fields plan to cut jobs, while only about one in seven expect to create new positions.
This trend is particularly pronounced in the auto industry, which has been hit hard by declining production, increased competition from Asia, and the impact of US tariffs.
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According to a separate study by EY, more than 51,000 jobs – around 6.7 percent of the sector’s workforce – were lost in the German car industry between mid-2024 and mid-2025.
Private-sector service providers are also cautious, with more than a third planning to reduce staff and only a fifth expecting to hire.
The construction industry, by contrast, reports a more balanced outlook, with neither significant job losses nor gains anticipated.
What explains the largely bleak outlook?
The authors of the study attribute the gloomy outlook to a combination of geopolitical tensions, high energy and social security costs, and what they describe as excessive bureaucracy.
“Without government reforms, it is becoming increasingly unlikely that the federal government’s billion-euro special programmes will have the hoped-for and necessary effect,” warned Grömling.
The survey also found that companies are holding back on investment: only 23 percent plan to invest more in 2026, while a third intend to cut back, exacerbating what the IW calls a long-standing investment crisis in Germany.
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