The latest employment data from Stats SA paints a bleak picture for South African businesses in the first quarter of the year, with economists warning that things are likely to get worse.
Stats SA’s Quarterly Labour Force Survey (QLFS) for the first quarter of 2026 showed that the country lost 345,000 jobs between January and March.
The number of employed people fell by 345,000 to 16.8 million, while the unemployed rose by 301,000.
As a result, the labour force declined by 44,000 people, meaning the vast majority of losses were people becoming unemployed.
The employment losses were also broad-based across the formal, informal, and household sectors.
The decline in the labour force exacerbated the rise in the unemployment rate, which reached 32.7%. There was an increase in discouraged workers (+178,000) over the quarter.
Nedbank said the data pointed to a rise in individuals seeking work but facing barriers to entry, such as the high costs of job searching amid generally weak labour demand.
The significant job losses could be attributed to seasonal factors, with the first three months of the year coming off a traditionally job-intensive festive period.
But overall, the increase in the unemployment rate was driven mainly by job shedding and insufficient job creation, compounded by rising unemployment and more potential workers giving up their job searches, Nedbank said.
“Over the year, total employment declined by 33,000, mainly in manufacturing, pointing to the ongoing constraints such as weak domestic demand, elevated input costs, and persistent infrastructure challenges, which continue to limit production and hiring,” it said.
More worrying, however, is the outlook for the year ahead, which the banking group said is uncertain.
The first quarter of the year saw only one month, March, sitting with the fallout of the ongoing Iran War, whereas the second quarter is likely to bear the brunt of the impact.
Dark clouds gathering for Q2
Nedbank said that Q2 has significant downside risks that are offsetting recent signs of improvement in domestic conditions.
“While structural constraints had begun to ease, the Iran war has introduced new headwinds,” it said.
“The US-Iran war has disrupted global supply chains, driving up oil prices, which have already translated into rising energy and transport costs.”
The bank said the shock is expected to put oil-intensive sectors under significant pressure through higher input costs and supply chain disruptions.
This, in turn, may impact jobs, putting the next round of employment data on the back foot.
The bank said the most exposed sectors are agriculture, transport, logistics, and manufacturing—particularly petrochemicals and plastics.
“For firms already operating in a low-growth environment, rising costs may limit their ability to expand operational capacity or their workforce,” the bank said.
“If the pressures persist, companies may be forced to shed jobs to save costs and restore profitability.”
But the bank stressed that there are some upsides to consider.
For one, domestic demand may prove more resilient under the current circumstances than during past shocks.
This is because consumers have experienced two years of rising real incomes, debt metrics at more
sustainable levels, and increased access to contractual savings, it said.
“Some support could also come from the public sector, as the government runs the local elections and pushes to improve service delivery,” it added.
However, this will remain constrained by the need for fiscal consolidation, limiting the upside.
Overall, the group said the outlook for employment has deteriorated since the start of the war, and employers will face greater cyclical pressure in the months ahead.
“Consequently, sticky to rising unemployment appears likely during the remainder of the year,” the economists said.
