Germany posted its lowest unemployment figures for 20 years on Thursday, registering below 2.8 million for the first time since 1991.
But according to the IAB, affiliated with the Federal Employment Agency, the development of the job market will depend a lot on how the current debt crisis in the eurozone is dealt with.
Recent economic prognoses have put next year's Gross Domestic Product growth rate at only one percent, meaning Germany's ongoing recovery and therefore the labour market will be much slower in 2012.
The researchers also pointed out that the assessment of current economic circumstances and the prognoses for the future were “unusually far apart,” which suggested that a slight shrinking of next year's GDP should not be ruled out.
The IAB also warned of a general reduction in the German workforce in 2012. Demographic factors alone would mean that 250,000 fewer people would be working, the institute said. The majority of this is expected be balanced out by immigration and an increasing number of women and older people joining the workforce, but this will still leave an overall loss of 40,000 workers.
There is expected to be large influx of workers from the eight central and eastern European EU member states in 2012, thanks to a relaxation of immigration restrictions this May.
The IAB added that the effect of the Hartz labour reforms implemented by Chancellor Gerhard Schröder were beginning to wear off, and that the new reserves of labour they had precipitated were now mostly exhausted.