Sifiso Mkwanazi, Economist, and Mpho Molopyane, Chief Economist; at Alexforbes

• South Africa’s unemployment rate declined more than expected to 31.4% in the fourth quarter (Q4) of 2025, from 31.9% in Q3 and below the Bloomberg forecast of 31.7%.

• The quarterly improvement was driven by a 44 000 increase in employment to 17.1 million and a 172 000 decline in the number of unemployed persons to 7.8 million over the quarter. However, on a year-on-year basis, employment rose by only about 21 000, reflecting persistently weak, below-potential economic growth that continues to constrain meaningful job creation.

• Employment trends were mixed in Q4. Gains were concentrated in the formal sector, which added roughly 320 000 jobs, and the household sector, which grew by about 18 000, while the informal sector shed around 293 000 jobs.

• Seven of the ten industries recorded job growth, led by community and social services, construction, finance, agriculture and transport. In contrast, trade saw the largest losses at about 98 000 jobs, followed by manufacturing at around 61 000. Regionally, unemployment rates fell in six of the nine provinces but increased in the Eastern Cape, Free State and KwaZulu-Natal.

• Youth unemployment remains a major concern. Those aged 15–24 and 25–34 recorded rates of 57.0% and 39.2%, respectively, with the overall youth (15–34) unemployment rate edging up to 43.8%. Although the number of unemployed youths declined by 84 000 to 4.6 million, youth employment also dropped by 113 000 to 5.8 million.

• While the overall decline in headline unemployment is encouraging, underlying trends point to a fragile labour market recovery. Employment gains are modest relative to the unemployed pool and have barely improved on a year-on-year basis, indicating that job creation is not keeping pace with population growth.

• More concerning is the increase in long-term unemployment, defined as those who have been unemployed for a year or more, which rose to 79.7% of the unemployed, or 6.2 million people. The expanded unemployment rate, which includes discouraged job seekers, also remains above 40%. This underscores entrenched structural challenges such as weak economic growth, skills mismatches, and the limited capacity of the economy to absorb new entrants.

• Looking ahead, we maintain our view that labour market conditions are likely to improve only gradually as domestic growth recovers slowly, mainly supported by resilient household consumption. However, the recovery in investment remains fragile, and the external environment remains challenging due to subdued global demand and the impact of tariffs.

• A meaningful improvement in employment remains dependent on stronger economic growth, which in turn hinges on accelerated structural reforms, a sustained recovery in business and consumer confidence followed through by investments and demand.

ENDS