Jobs market looks grim – and the Iran shock is still coming

South Africa shed 345,000 jobs in the first quarter, pushing unemployment to 32.7%. And economists warn the Iran war’s bite is still to come.

The official jobless rate climbed 1.3 percentage points to 32.7% in the first quarter, from 31.4% at the end of 2025, Stats SA said on Tuesday. Economists polled by Bloomberg had pencilled in 31.7%. There are now 16.8-million people in work, while the ranks of the unemployed have swelled by 301,000 to 8.1-million.

The trouble is, the data largely predates the moment oil markets seized up and the rand started to wobble. It also predates the South African Reserve Bank effectively parking its rate-cutting cycle – and possibly preparing to lift rates again before year end. Brent crude was near $70 a barrel before the US and Israel struck Iran on February 28. It’s now about $104, with supplies dwindling every week that the Strait of Hormuz stays effectively shut, and hopes fading that the conflict will end soon.

“South Africa still faces substantial obstacles to job creation, including barriers to entry-level employment, as well as structural rigidities that limit the economy’s ability to absorb labour,” Sanisha Packirisamy, group economist at Momentum, tells Currency.

The pre-war recovery in consumer spending leaned heavily on expected rate cuts and softening inflation. Both bets are off. “Expected interest rate cuts have nonetheless shifted to expectations of higher interest rates to defend the country’s 3% inflation-targeting mandate,” she says. The International Monetary Fund last month trimmed its 2026 growth forecast for South Africa to 1% from 1.4%, citing the war.

In the blast radius

The first-quarter carnage was uneven. Community and social services – a proxy for state-led hiring – lost 206,000 jobs. Construction shed 110,000 and transport 30,000. Manufacturing (+38,000), mining (+32,000) and agriculture (+10,000) added workers, but those modest gains were swamped.

Nedbank economists Busisiwe Nkonki and Nicky Weimar warn that the sectors which held up in the first quarter sit squarely in the war’s blast radius.

“The most exposed sectors include agriculture, transport, logistics, and manufacturing – particularly industries such as petrochemicals and plastics,” they wrote in a note to clients. “For firms already operating in a low-growth environment, rising costs may limit their ability to expand operational capacity or their workforce. If the pressures persist, companies may be forced to shed jobs to save costs and restore profitability.”

South African consumers, they argue, enter this shock in better shape than in past cycles, after two years of rising real incomes, lower debt-service ratios and improved access to contractual savings – a reference to two-pot withdrawals. But that cushion thins fast if the war drags on.

No quick recovery

What makes the first-quarter print especially grim is what it says about people who have given up. The number of discouraged work-seekers rose by 178,000 to 3.9-million. Add them and other potential workers to the official jobless count, and Stats SA’s expanded measure climbs to 43.7% from 42.1%, a level last seen in the second quarter of 2022, when the country was still nursing pandemic wounds.

“On the expanded definition of unemployment, youth joblessness remains at a worrying one in every two,” says Packirisamy. “Growth has unlikely been sufficient to make a meaningful dent into youth unemployment, partly because of weaker labour-intensive growth and a persistent skills mismatch.”

Unemployment among 15- to 34-year-olds jumped two percentage points to 45.8%, with employed youth dropping by 258,000 over the quarter. Almost one in two young people in the labour force is out of work.

 “The outlook for employment has deteriorated since the start of the war,” Nedbank’s Nkonki and Weimar said. “Employers will face greater cyclical pressures in the months ahead, which pose significant downside risk to job creation. Consequently, sticky to rising unemployment appears likely during the remainder of the year.”

Packirisamy isn’t convinced the first-quarter lift in manufacturing jobs will hold, given the sector’s exposure to oil and global demand. “Weak fixed investment prospects for this year suggest no quick recovery in unemployment,” she says.

ALSO READ:

• Jobless rate ticks down, but South Africa’s jobs crisis hasn’t
• Jobs crisis: Start with the easy wins
• Manufacturing meltdown: South Africa’s jobs crisis deepens

_{Top image: Rawpixel; Currency.}