A commentary by our author Klaus Bastian:
According to a draft seen by Reuters, the federal government projects economic growth of 1.3 percent for 2026. Yet, for the workforce, the labor market continues to move in the opposite direction. In August, there were 235,000 fewer people employed than a year earlier. At the same time, the number of unemployed persons rose by 120,000 to 1.86 million. Employment subject to social security contributions is also now in decline. While government spending is stimulating the economy, the employment base is shrinking. Furthermore, the Federal Employment Agency requires billions in federal aid. Economics Minister Katherina Reiche is set to present the official autumn forecast on October 8.
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The employed have yet to benefit from the announced economic upturn
At first glance, the higher growth forecast suggests an economic turnaround. However, the labor market does not bear this out. In August, Destatis recorded 45.41 million employed persons residing in Germany—a figure 0.5 percent lower than in August 2025. Furthermore, on a seasonally adjusted basis, employment fell by another 29,000 compared to July.
This decline is therefore no longer merely a matter of a single weak month. Since January 2025, the number of employed persons has consistently remained below the level of the previous year. The Federal Employment Agency (BA) also sees no sign of a turnaround so far; in late September, BA head Andrea Nahles stated that the economic improvement was “not yet reaching” the labor market. Consequently, the government’s forecast and actual employment trends are currently diverging.
Economy Grows – Labor Market Shrinks
The decline in employment subject to social security contributions is particularly concerning. In July, 34.68 million people held such jobs—84,000 fewer than a year earlier. At the same time, the number of marginally employed workers fell by 50,000. Consequently, the labor market is losing jobs precisely where contributions to health, long-term care, pension, and unemployment insurance are generated.
Meanwhile, the number of benefit recipients is rising. In September, just under 2.994 million people were registered as unemployed. Seasonally adjusted, unemployment increased by another 12,000 people compared to August. Additionally, 1.082 million people received unemployment benefits—an increase of 85,000 over the previous year. Thus, the anticipated economic upturn has barely reached the workforce so far, while the financial consequences of unemployment are already becoming apparent.
Billions from the Federal Government Instead of a Labor Market Boom
The financial situation of the Federal Employment Agency (BA) also reflects the flip side of these economic trends. According to the federal government, its borrowing requirements could rise to around €8.4 billion in 2026. This is in addition to a €1.4 billion loan from the previous year. If the BA is unable to repay this, its total debt could reach approximately €9.8 billion by the end of the year.
This is particularly striking given the simultaneous talk of an economic upturn. However, some of this growth stems from high government spending on infrastructure and defense. Private investment and job creation have not yet provided a comparable stimulus. Consequently, a rising gross domestic product reveals little about whether companies are actually hiring more staff again.
Employment levels emerge as the weak point in the government’s forecast
The IAB highlights this contradiction particularly clearly. While the institute expects a return to economic growth in 2026, it simultaneously projects an average of 210,000 fewer people in employment. For 2027, it anticipates a further decline of 140,000. Thus, even increased economic output is evidently insufficient to halt job losses in the short term.
The federal government’s economic forecast therefore presents only part of the picture. Growth alone does not equate to a broad-based upswing. What matters is whether companies invest and create additional jobs, thereby strengthening the contribution base for social security funds. This is precisely what is currently lacking. As long as employment falls, unemployment rises, and the federal government is forced to transfer billions to the Federal Employment Agency, the heralded labor market recovery remains elusive.
Author: Klaus Bastian – Blackout News
Sources: Reuters (01.10.26) – Destatis (30.09.26) – Bundesagentur für Arbeit (30.09.26) – IAB (24.09.26) – Gemeinschafts-Diagnose (24.09.26)