A Cooling Job Market: What Germany’s September Uptick Means for European Jobseekers

Germany’s labour market, the foundation of European industrial stability, showed its first cracks in September 2025. The Federal Employment Agency (Bundesagentur für Arbeit) reported that unemployment rose by 14,000, keeping the national rate steady at 6.3 per cent but ending a year of incremental improvement.

Job openings fell to 630,000, around 10 per cent lower than a year earlier. Data from IFO Institute surveys reinforce the slowdown, with business expectations in manufacturing now at their weakest since late 2023.

The numbers suggest not collapse but a cooling phase, where firms hesitate to hire even as the economy skirts recession.

Europe’s hidden unemployment emerges in the data

According to Eurofound’s Q2 Labour Market Monitor, underemployment and inactivity remain the unspoken anchors of Europe’s weak recovery.

Total labour market slack across the EU stands at 10.8 per cent of the extended labour force - roughly 25 million people either underutilised or disengaged. INSEE’s recent study on French underemployment finds a similar picture: short-hours contracts rising despite stable employment totals.

These patterns point to an economy that has normalised fragility, where people are working but not fully employed.

Hiring sentiment sags as participation peaks

The OECD Employment Outlook 2025 notes that labour participation across member states has reached a record 70.2 per cent, yet momentum is fading.

The IFO Employment Barometer shows hiring intentions among German firms at their lowest level in two years, while Eurochambres’ EU-wide survey finds only 41 per cent of companies plan to expand their workforce in the next six months. With real wage growth slowing to around 2 per cent, the market is entering a period of stability without dynamism: jobs are plentiful, but mobility is constrained.

Permanent roles decline as short-term contracts expand

The Recruitment & Employment Confederation (REC) UK report for September reveals that permanent placements fell for a seventh consecutive month, while temporary hiring rose marginally.

Similar trends appear in Spain’s SEPE data, where temporary contracts have increased by 4.3 per cent year-on-year. Candidate supply is rising across sectors, but employers are cautious, preferring short-term commitments.

The shift suggests an adjustment phase: rather than shedding staff, firms are buying time.

Mismatch intensifies between skills and vacancies

A McKinsey Global Institute study on European workforce transformation highlights widening skills gaps, particularly in digital operations, logistics, and clean manufacturing.

In Ittaly and the Netherlands, demand for advanced manufacturing and data specialists exceeds available talent by nearly 20 per cent. Cedefop, the EU’s vocational skills agency, confirms that “skills obsolescence” is now the main drag on productivity.

Europe’s headline employment numbers mask a subtler truth: structural misalignment, not cyclical weakness, is the deeper challenge.

A mature market, not a collapsing one

The European Central Bank’s September Labour Review characterises the euro area’s job market as entering a “steady state” rather than decline.

Employment growth has decoupled from GDP, with output projected to rise by just 0.9 per cent in 2025. The Financial Times notes that wage restraint and productivity stagnation now coexist uneasily, leaving jobseekers in a market that values precision over breadth.

Success increasingly belongs to those with technical fluency, cross-sector literacy, and the willingness to pivot quickly within a cooling but structurally stable economy.