Firms Cutting Fewer Jobs (August 2026)

On 27 August 2026 the ifo Institute reported that its employment barometer stood at 94.8 points for August, up from 93.0 in July. The institute described the level as the highest since May 2025. The press release has been picked up by economic media, including WirtschaftsWoche, and distributed via newswires that relayed the core figures.

Crucially, the barometer records short‑term corporate staffing plans – typically expectations for the coming three months – rather than already executed layoffs. The ifo survey draws on responses from roughly 9,000 to 9,500 companies across industry, services, trade and construction. The institute’s assessment, quoted in the release, was that "the labour market shows a slight upward movement," with the caveat that "in total jobs are still being cut," words attributed to ifo researcher Timo Wollmershäuser.

The strength of the employment barometer lies in its role as a leading indicator. By asking companies monthly about hiring and reduction plans, the survey can flag turning points in labour demand earlier than official employment or unemployment statistics, which typically lag.

However, the indicator measures intentions, not outcomes. A firm’s plan to reduce payrolls in the coming quarter can be altered by changing order books, access to finance, or shifts in policy. The ifo press note does not include a full set of tabulated sector and month values within the release text; the institute states that detailed data are available on request. Journalists and analysts seeking to interpret the signal more precisely should obtain the dataset for sectoral and regional breakdowns.

The ifo release highlights divergent developments between sectors. In industry the speed of job cuts has slowed and the barometer registered its highest reading for that sector since March 2024. This suggests that manufacturing companies have either scaled back planned reductions or begun tentative re‑hiring or retention measures.

Trade showed improvement but still displayed a net bias towards cuts in firms’ plans. For services and construction the institute expects employment to be "broadly stable," meaning hiring and reduction plans roughly offset each other. The press release does not present the complete numeric breakdown; that remains available via the institute’s data file and should be requested to analyse which sub‑sectors or company sizes drive the aggregate signal.

Several economic forces could be shaping the upward move in the barometer: a modest improvement in order books for some manufacturers, seasonal factors, and reduced uncertainty about future interest rate paths or input costs. When firms perceive lower policy or macroeconomic risk, they may downgrade plans for workforce reductions.

Nonetheless, the European economies remain exposed to constrained growth and cost pressures. A barometer value below 100 still indicates that more firms report plans to cut jobs than to add staff. Structural issues such as skills mismatches, supply chain constraints or sector‑specific demand slumps can prevent reported intentions from translating into net employment gains even when short‑term plans appear less negative.

For policymakers and employment agencies, a moderating pace of intended job cuts reduces near‑term pressure on active labour market measures and social support systems. Early signs of stabilisation can justify a shift from crisis‑mode interventions toward targeted training, hiring incentives in growth niches and programmes to speed reallocation of labour between sectors.

Yet the aggregate value being beneath 100 means the labour market has not entered a broad expansion. Policy responses therefore need to be nuanced: supporting upskilling where demand exists, and cushioning dislocation in segments that remain weak. Companies, too, will balance short‑term payroll plans against longer‑term strategic investments in automation, digitalisation, or workforce retention — all factors that will influence whether planned cuts are implemented or reversed.

Several follow‑ups are important for thorough reporting. First, obtain and analyse the full ifo dataset to inspect regional patterns, firm‑size effects and precise sectoral month‑by‑month movements. Second, compare the survey intentions with realised flows in official labour statistics from the Federal Employment Agency and other administrative sources to establish the historical conversion rate from planned cuts to actual layoffs.

Third, investigate which sectors or sub‑sectors show persistent divergence between intentions and outcomes and why — for example, whether temporary contract adjustments, subcontracting practices, or short‑term demand swings explain discrepancies. The ifo release is a clear early signal of easing pressure on jobs, but it does not yet indicate a broad or durable labour market recovery. Robust analysis requires combining the barometer with additional leading indicators, administrative employment data and firm‑level case studies.