German Jobs Increasingly Threatened by Economic Transformation

(Bloomberg) -- Germany’s labor market is increasingly weighed down by the country’s struggle to modernize its economy, according to a new study.

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Surveying regional labor agencies, the Institute for Employment Research found that structural problems — like challenges with digitization and efforts to trim dependence on fossil fuels — are seen by more than a third as a key reason for job losses. That’s up from single digits in 2022.

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While cyclic reasons for shedding staff still dominate, the research indicates that “the key to a rebound lies in a renewal of the economy — through investments, innovations, startups and the scaling of new business models,” the institute said in the study, published Thursday. “Such an investment-oriented economic policy is particularly suitable in the current situation, as it provides both cyclical and urgently needed transformational impetus.”

German unemployment long remained highly resilient to economic weakness, only pushed higher by the arrival of millions of Ukrainian refugees. But the jobless rate has crept past 6% as companies move to cut costs amid subdued demand.

Germany’s deep-seated economic struggles are a key topic before snap elections taking place next month. Chancellor Olaf Scholz looks set to be ousted by Friedrich Merz, who leads the conservative CDU/CSU bloc. The latter promises tax cuts and higher incomes for the middle class to free up room for investments and consumption.

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