South Africa's formal non-farm employment recorded modest quarterly growth in the fourth quarter, but the broader labor market remains under pressure as weak annual trends, low confidence and persistent structural challenges continue to weigh on the country's economic outlook.
Speaking to CNBC Africa, FNB senior economist Koketso Mano said the latest quarterly employment figures were broadly in line with expectations, reflecting the normal seasonal growth seen in the final quarter of the year, especially from the business sector. Business services also contributed to job gains, helping formal employment expand by 0.2% quarter-on-quarter, equivalent to about 18,000 jobs.
Still, Mano cautioned that the recovery must be seen in the context of a fragile and uneven recovery.
“I think when you look at it in terms of momentum, you can be somewhat encouraged that this economy is still creating jobs, even though the number is down by 18,000,” he said. “But when you look at it on a year-over-year basis, you're seeing job losses, and it still highlights to us that you're operating in a fairly weak economic and business environment.”
The latest data highlights divisions in the story of South Africa's labor market. On the one hand, the economy is gradually regaining employment levels lost during the COVID-19 period, with some sectors showing resilience. On the other hand, the pace of job creation remains slow, and the annual decline points to an economy that has yet to achieve sustainable momentum.
According to Mano, this type of disorganized employment pattern is characteristic of low-growth environments. Companies add employees in some quarters, especially when seasonal demand increases, but those gains are not yet strong or widespread enough to establish a sustained hiring cycle.
“As anticipated, you will continue to see this volatility in terms of quarterly trends in employment, job creation and deficit,” Mano said. “This is exactly what you would see in an environment of weak economic growth.”
Fourth-quarter performance was helped by trade, a sector that often benefits from year-end consumer demand, while business services also added jobs. But productive sectors of the economy are under pressure, and slow earnings growth suggests households and firms are still operating under tight conditions.
For businesses, the data shows that recruitment appetite remains highly sensitive to confidence levels. Mano said the fourth quarter of 2025 was marked by relatively weak business sentiment, despite earlier expectations that confidence would recover more strongly.
“Last year, we thought the confidence was going to increase,” he said. “But then we actually saw the tariffs coming and that resulted in a loss of confidence.”
That pressure has not completely disappeared in 2026. While confidence indicators improved at the start of the year, Mano warned that fresh geopolitical turmoil could once again weigh on sentiment, delaying strong private sector hiring.
“Now coming into 2026, we have actually seen an increase in confidence, but obviously now we are sitting in the middle of a war, so it could also lead to a decrease in confidence,” he said.
The message for investors and policymakers is that South Africa's labor market is exposed to both domestic vulnerabilities and external shocks. Weak confidence, global trade disruption and geopolitical uncertainty are exacerbating long-standing structural problems in the economy, including low growth, limited competitiveness and inadequate job absorption.
While the quarterly increase in employment offers some indication that the labor market has not completely stalled, the annual decline serves as a reminder that the economy is still not growing fast enough to meaningfully reduce unemployment or support broad-based income gains.
Mano said stronger and more sustainable job creation will require a more robust growth environment and reforms that will improve South Africa's long-term investment case.
It reflects a renewed focus on the policy mix at a time when officials are also trying to control inflation risks. Mano said policymakers face a difficult balancing act: maintaining macroeconomic stability while also protecting vulnerable households and industries in an economy where labor market conditions remain weak.
“As much as the Reserve Bank should push for this 3% target, and this is good for long-term confidence and stability in the economy, given the shock, it is important how the government ensures that high inflation is not embedded in the economy, but also protects vulnerable households and industries,” he said.
In his view, structural reform remains the key long-term solution. Ongoing efforts to improve the business environment, increase investment and strengthen the productive capacity of the economy could help South Africa be less vulnerable to external shocks and better position itself to generate sustained employment growth.
Mano described investment conferences and reform initiatives as important for improving confidence over time. If those efforts gain momentum, he said, they could boost South Africa's growth potential and encourage consumers and investors to weather the volatility.
“This is what drives the South African outlook on a long-term basis,” Mano said, referring to reforms and strong confidence in the structural economy.
However, the latest employment figures paint a cautious picture. The formal sector is still adding jobs at the margin, but not at a pace that would indicate a decisive shift. With annual employment still low and confidence weak in the face of local and global pressures, South Africa's labor market recovery remains slow, uneven and closely linked to whether macroeconomic reforms can deliver strong growth.