Germany’s seasonally adjusted unemployment rate rose to 6.4% in July 2026 from 6.3% in June, overshooting market expectations of 6.3%. The number of unemployed increased by slightly more than anticipated, up by 6,000 to 2.99 million—just under the politically sensitive threshold of 3 million. On a non-seasonally adjusted basis, however, unemployment climbed above 3 million.
The labor market has continued to deteriorate with a lag in the wake of the geopolitical shock triggered by the Iran war, which began in February. At the same time, inflation accelerated to 2.8% in July as higher energy prices fed through the economy.
Although Germany’s GDP growth in the second quarter surpassed expectations, the outlook remains uncertain. Renewed hostilities between the US and Iran could keep energy prices elevated, bolster expectations of tighter ECB policy, and dampen both investment and consumer spending.
