Germany's seasonally adjusted unemployment rate rose to 6.4% in July 2026 from 6.3% in June, exceeding market expectations of 6.3%. The number of unemployed increased by slightly more than expected, rising by 6,000 to 2.99 million, just below the politically significant 3 million threshold. On a non-seasonally adjusted basis, unemployment climbed above 3 million. The labor market has continued to weaken with a lag following the geopolitical shock of the Iran war, which began in February. Adding to the pressure, inflation accelerated to 2.8% in July as higher energy prices filtered through the economy. Although Germany's second-quarter GDP growth exceeded expectations, the outlook remains clouded by renewed US-Iran hostilities, which could keep energy prices elevated, reinforce expectations of tighter ECB policy, and weigh on investment and consumer spending.