Germany’s service sector has recorded its first drop in employment since the COVID-19 pandemic, with job losses most pronounced in trade, transport, and hospitality. The downturn reflects broader economic challenges, including a surge in business closures.

For the first time since the COVID-19 pandemic, Germany’s service sector has experienced a decline in employment. In the second quarter of this year, the number of people employed in the sector fell by 0.1% compared to the same period last year, according to recent data. The hardest-hit areas include trade, transport, and hospitality, which saw a 1.1% reduction in jobs. However, public services, education, and healthcare bucked the trend, with employment in these areas rising by 1.5%.

The broader economic picture reveals a troubling trend across multiple sectors. Overall employment in Germany dropped by 0.1% compared to the previous quarter and by 0.5% year-on-year, with approximately 45.7 million people employed in the second quarter of 2026. Outside the service sector, construction and agriculture saw sharper declines, with employment falling by 0.7% and 1.5%, respectively. The industrial sector also continued its downward trajectory, recording a 2.0% drop in employment.

The rise in business closures is a significant factor contributing to these job losses. Last year, nearly 188,000 companies in Germany shut down, marking the highest number in almost two decades. While only 13% of these closures were due to insolvency, a growing number of businesses ceased operations because owners retired without finding successors. Experts warn that a combination of geopolitical tensions, high energy costs, and domestic bureaucracy is exacerbating the economic strain, creating what some describe as a ‘crisis squeeze’ on the German economy.