German companies were “scaling back their layoff plans” and the ifo Employment Barometer climbed from 93.2 points in July to 95.4 points in August, the ifo Institute announced on Thursday.

Following a heavy decline across all German industry sectors in April at the height of the COVID-19 crisis, it was the fourth monthly increase in a row. The ifo Employment Barometer is based on around 9,000 monthly responses from German companies.

“A turnaround is imminent on the German labor market,” ifo noted. After layoffs in the last months, “first signals for new hires have now appeared.”

Germany’s service sector recovered the quickest from the employment shock of the COVID-19 crisis, with rising demand for new employees in particular in the information technology (IT) sector, according to ifo.

The construction industry in Germany also recovered but the number of companies planning to lay-off staff was just as high as those who expected an increase in staff so that the overall sector displayed “little movement in employment development.”

Although the employment barometer for Germany’s important manufacturing sector “rose considerably,” a majority of companies was still tending to lay off employees rather than hire new staff, according to ifo.

Germany’s trade sector likewise continued to be “reluctant to recruit staff and tends to expect layoffs,” ifo noted.

Last week, the Federal Statistical Office (Destatis) announced the number of people in employment in Germany in the second quarter of 2020 decreased by 1.4 percent compared to the previous quarter to around 44.7 million.

Because of the COVID-19 crisis which hit Germany in March, an “extraordinarily large decline” had been observed instead of the usual “spring upturn,” Destatis noted.

The unemployment rate in Germany in July rose by 0.1 percentage points compared to the previous month to 6.3 percent, according to recent data by the Federal Employment Agency (BA). Figures on the development of the German labor market in August are scheduled to be published by BA next week.

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