Jobless rate ticks down, but South Africa’s jobs crisis hasn’t

South Africa’s official unemployment rate edged down to 31.4% in the final quarter of 2025 – a headline that fits neatly into President Cyril Ramaphosa’s turnaround narrative. But the detail reveals far less to celebrate: job creation was modest, the labour force shrank and more people gave up looking for work.

In other words, the labour market remains frighteningly brittle.

Employment increased by 44,000 quarter on quarter, while the labour force fell by 128,000. That takes the unemployment rate to its lowest in five years. At the same time, the number of discouraged work-seekers rose by 233,000 to 3.7-million – that’s people who want work but have stopped trying because they believe there are no jobs to be found.

Once those sidelined workers are included, the measure of labour underutilisation stays punishingly high. While the combined unemployment-plus-potential-labour-force rate, which Stats SA calls LU3, eased marginally to 42.1% from 42.4% in the prior quarter, it remains higher than the 41.9% recorded in the fourth quarter of 2024.

“Millions of South Africans still want work, including around 4.6-million in the potential labour force, 3.7-million of them discouraged work-seekers, but are too disconnected from active job search to be counted as ‘officially unemployed’,” says Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research. “So yes, things are improving at the margin, but the true employment deficit remains massive.”

For her, there’s another red flag. “Falling unemployment is always more encouraging when it comes alongside rising participation, particularly among the youth, where labour market attachment remains worryingly low,” she tells Currency. The labour-force participation rate dipped by 0.4 percentage points to 59.3%.

The youth picture is especially grim – still. The unemployment rate for 15- to 34-year-olds rose marginally to 43.8% from 43.7% in the third quarter.

State leads the way in jobs growth

The biggest gains were in community and social services (+46,000), which is mostly state-led, construction (+35,000) and finance (+32,000). Job losses were steep in trade (-98,000) and manufacturing (-61,000).

IJssel de Schepper notes that momentum in tradable sectors matters if South Africa wants more than marginal gains. Manufacturing’s job losses, she says, likely reflect both domestic constraints and global pressures, including stress in industries such as steel and vehicle manufacturing.

Sanisha Packirisamy, chief economist at Momentum Investments, argues the ingredients for a meaningful improvement are well known – yet still missing in a way that will make a difference.

First, South Africa needs faster growth, underpinned by structural reforms that reduce costs and bottlenecks in electricity, water, rail and ports – and then a second phase focused on local government performance and better integrating the informal economy.

Second, she warns against mistaking government programmes for a full solution. Public employment initiatives are not at the “scale” required, given the size of the crisis.

Third, she flags the labour market’s structural rigidities. In a low-growth environment, companies can choose machines over people if hiring feels risky and firing feels impossible. “We need to fix the labour regulations, making it a bit more flexible,” she tells Currency, adding that regulatory hurdles can discourage private sector hiring precisely when confidence is fragile.

Unemployment will not fall rapidly without stronger private sector hiring – especially in small and medium-sized businesses – and without reforms that convince companies the recovery is durable enough to justify taking on staff.

The Ramaphosa promise

Ramaphosa has leaned heavily on jobs as proof that economic growth is returning, reforms are starting to deliver dividends and jobs will follow. In his state of the nation address on February 12, he told parliament: “As the economy grows, the rate of unemployment is starting to decline.”

He also pointed to public and social employment programmes as a bridge, saying government has created “over 2.5-million opportunities through the presidential employment stimulus”. He pledged to bolster that programme alongside the expanded public works programme and the community work programme.

But the statistical reality is much tougher than Ramaphosa would like to believe: South Africa is still operating with a labour market where millions are detached from work, and where improvements in the headline rate can arrive through weaker participation rather than strong hiring.

That is why the budget, to be delivered on February 25, will be judged less on rhetoric than on whether it accelerates the “fix the basics” agenda – and, crucially, whether it crowds in private investment and private sector employment.

A separate note from Allan Gray highlights what’s missing from Ramaphosa’s “turnaround”: fixed investment.

“Despite improved sentiment, South Africa’s gross fixed capital formation … remains anaemic,” it says, limiting the economy’s medium-term growth potential. Allan Gray adds it is watching for “a sustained breakout in gross fixed capital formation” as evidence of a more durable inflection.

Until businesses invest in new capacity rather than simply sweating old assets, unemployment can only improve at the margins while the underlying jobs deficit remains entrenched.

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