Austria's economy: Unemployment is increasing despite the public boom!

Austria's economy: Unemployment is increasing despite the public boom!

Austria's economy is currently facing a challenging situation that is characterized by two years of recession and one year of stagnation. The increase in unemployment is mainly caused by the increased costs for many companies. Despite these adversity, the public service shows an increase in employment. According to reports from Krone , the number of employees in the public sector rose from 818.140 in 2008 to 1,050,651 in 2024. Interestingly, despite savings requirements, further personnel structure in the public service is planned.

The financing of the public sector, however, is a challenge. In the past two years, the costs for the state and social security have increased by ten billion euros. As a result of digitization and artificial intelligence, there are no savings in the public sector, which also contains the economic situation.

labor market situation and hidden unemployment

Although the labor market situation in Austria is considered good, many experts do not perceive it as positive as often represented. Agenda Austria indicates that political interventions in the labor market are inefficient and lead to hidden unemployment. An urgent need for reforms to reduce this hidden unemployment is considered necessary.

A central problem is early retirement, which is seen as a hindrance to the labor market. The OECD has even refuted the myth that early retirement creates jobs for younger workers. The actual retirement age for men is around 62 years and for women 61 years, whereby the statutory retirement age for women is raised to 65 years.

economic forecasts and future challenges

according to the wifo it is expected that the longest recession of the second republic will be left behind in mid-2025. Nevertheless, the recovery of uncertain international framework remains. The gross domestic product (GDP) shrank by 1% and in 2024 by 1.2%, while a decline was predicted by 0.3% for 2025. However, GDP growth of 1.2% is expected for 2026, although this weaker will be weaker than in Germany, where growth of 1.5% is predicted.

The construction industry will walk through the valley sole in the first half of 2025, and a residential initiative from 2024 will support demand from the 2nd half of 2025. Despite a slight expansion of employment in 2024, the unemployment rate will increase to 7.3% in 2025 before falling to 7.1% in 2026 In summary, it can be stated that the economic perspectives in Austria are still characterized by challenges. While an increase in employment is being recorded in the public sector, the private economy must fight with the consequences of the recession and reforms in the labor market are essential to avoid future problems.