According to the most recent business survey conducted by the Munich-based Ifo Institute and issued on August 16, the labor situation in Germany is becoming worse as more businesses in Europe's largest economy experience personnel shortages.

An increase from just over 42% in April, the study found that more than 43% of the almost 9,000 employers polled experienced a shortage of skilled personnel in July. In July 2022, the rate hit its highest point, which was close to 50%.

According to Ifo's Stefan Sauer, "despite a sluggish economy, many companies are still desperately searching for suitable employees," Bloomberg said.

After energy costs increased as a result of the cumulative impacts of the Russian offensive in Ukraine, Germany experienced a period of recession in the winters of 2022 and 2023.

Since then, the inflation has been stable. A decline in manufacturing has also negatively impacted it. But right now, it seems like the services sector is particularly fragile.

According to Ifo, the service industry has been particularly badly impacted, with three-quarters of accountancy and law firms reporting similar difficulties in hiring the right candidates. Transportation, architecture, and engineering all experienced historic shortages.

Moreover, labor shortages were observed by approximately 41% of manufacturers of machinery and equipment. An improvement of just under 35% was seen in the manufacturing sector's overall percentage. 

At the turn of the century, Germany's population of working age reached its peak. But because to the influx of millions of immigrants and the rise in the number of working women, the nation has managed to stave off the demographic collapse over the past few decades. 

As baby-boomers start to retire, both trends are currently waning.

Why does it mean that?
Simply put, it indicates that in light of the rising anti-immigrant sentiment, the German economy will be more dependent on raising worker productivity.

Politically, the far-right Alternative for Germany (AfD) is dominating surveys and has been charged with spearheading the anti-immigrant movement, a claim the AfD has strenuously refuted.