German economy grows 0.2% but jobs lag

The German economy grew slightly faster than expected over the summer, but the labour market has yet to feel the benefit. Gross domestic product (GDP) rose by 0.2 percent in the third quarter of 2026 compared with the previous three months, adjusted for prices, seasonal and calendar effects, the Federal Statistical Office (Destatis) reported on Friday, 30 October. Forecasts had pointed to growth of 0.1 percent. On the same morning, the Federal Employment Agency (Bundesagentur für Arbeit, BA) said that 2,955,000 people were registered as unemployed in October, 44,000 more than a year earlier.

Together, the releases describe a German economy recovering slowly while employers remain cautious about hiring. For job seekers, that means patience will be needed for a while longer.

German economy grows for a third quarter in a row

Compared with the third quarter of 2025, price-adjusted GDP was 1.3 percent higher, or 1.2 percent after adjusting for the number of working days. Destatis left its earlier figures for the first half of the year unchanged, with growth of 0.4 percent in the first quarter and 0.3 percent in the second. This means the German economy has now expanded in three consecutive quarters, after a long period of weak or no growth.

Private and government consumption rose slightly and supported the result, according to the preliminary data. Investment, however, declined. Exports, which had grown strongly in the first half of the year, lost much of their momentum over the summer. Destatis has not yet published exact figures for the individual components and will release detailed results on 25 November.

Fiscal package props up growth

Economists credit much of the expansion to the government's debt-financed fiscal package. Without this artificially created boost, output would probably have stagnated, chief economist Alexander Krüger told ZDFheute. He warned that the effect is unlikely to last beyond 2027 unless the money flows into investment that strengthens long-term growth.

There were also obstacles during the summer. Low water levels on the Rhine made inland shipping more difficult and weighed on the chemical and steel industries, ZDFheute reported, but the contraction that some had feared did not happen. Our report on Rhine low water and freight costs explains how this affected companies. According to ZDFheute, business sentiment measured by the ifo institute has improved for six months in a row, the federal government has raised its growth forecast for 2026 to 1.3 percent, and ifo expects 1.4 percent. Economists expect a stronger fourth quarter.

Unemployment stays close to 3 million

The usual autumn revival on the labour market was weak this year. The number of registered unemployed fell by 40,000 from September to 2,955,000, and the unemployment rate slipped by 0.1 points to 6.3 percent. Once seasonal effects are removed, however, unemployment rose by 4,000. "The decline in unemployment in October is comparatively weak," BA chief Andrea Nahles said at the monthly press conference in Nuremberg.

Other indicators show similar conditions. Companies reported 654,000 vacancies to the agency, 31,000 more than a year ago but still a level that Nahles described as low. About 1,065,000 people received Arbeitslosengeld, the insurance-based unemployment benefit, which is 88,000 more than in October 2025. Underemployment, a broader measure that also counts people in training schemes and similar programmes, stood at 3,592,000. The number of jobs subject to social security contributions was 45,000 lower in August than a year earlier.

Why jobs lag behind the German economy

According to Reuters, Nahles said the labour market usually responds to an economic recovery with a delay of six to nine months, and that it is not yet clear whether the current upswing is stable and self-sustaining. She said she had become somewhat cautious about predicting a turnaround. In the agency's own assessment, economic conditions are still not strong enough to bring about an improvement in the labour market.

There are nevertheless some signs that the German economy is stabilising on the jobs front. Short-time work (Kurzarbeit), which companies use to cut hours instead of jobs during a downturn, is falling: around 98,000 employees received cyclical short-time allowance in August, about 66,000 fewer than a year earlier. The unemployment rate calculated by Destatis under the international ILO definition, which counts people differently from the national register, was 4.1 percent in September.

What this means for job seekers and expats

The figures offer a mixed picture for foreigners looking for work. There are more vacancies than a year ago, but the number of unemployed is also higher, so competition for many jobs remains strong. The crisis in industry is also not over yet, which keeps many manufacturers cautious about new hiring. Our earlier report on unemployment topping 3 million gives more background on the trend.

Anyone who expects their job to end must register with the Agentur für Arbeit as a job seeker (arbeitsuchend) at least three months before the contract ends, or within three days of learning about it if the notice period is shorter. Missing this deadline can lead to a one-week suspension of benefits (Sperrzeit). As a rule, Arbeitslosengeld requires at least 12 months of employment covered by unemployment insurance within the last 30 months, although some exceptions apply. It amounts to 60 percent of the net pay calculated by the agency, or 67 percent for people with at least one child, and is paid for up to 12 months for people under 50, depending on how long they were insured. Our guide to unemployment benefits explains the details.

Non-EU citizens whose residence permit is linked to their job should also contact the Ausländerbehörde (immigration office) promptly after losing employment. A job loss does not automatically end a residence permit, but the time allowed to find new work varies, so it is best to clarify the situation early rather than wait for the next appointment.