By Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole & Koketso Mano
South Africa (SA) shed 344 626 jobs in 1Q26, reversing total employment back to 16 754 282, and leaving it marginally below 1Q25 levels. The unemployment rate rose to 32.7% (from 32.4% in 4Q25), while the expanded rate increased to 43.7%, reflecting a continued rise in discouraged work-seekers. Job losses were broad-based across formal, informal and household sectors, signalling widespread pressure rather than isolated weakness. At the same time, the number of people outside the labour force (i.e., those economically inactive, including discouraged individuals) continued to rise, reflecting further erosion in productive capacity. Ultimately, the rapid deterioration in labour market conditions and sustained slack raises concerns about the near-term outlook amid the ongoing energy shock.
While the first-quarter employment data can reflect seasonal factors and headline figures may obscure underlying sectoral weaknesses, the latest statistics are consistent with a low-growth environment that has amplified structural challenges. For instance, subdued activity in the construction sector is consistent with sluggish long-term investment and skill shortages. Additionally, existing challenges in manufacturing, such as high input costs and increased competition from Eastern markets, may be intensified by the conflict's impact on demand for durable and high-value products.
Tighter financial conditions and reduced profit margins should adversely affect consumer-facing industries, but some businesses in trade, hospitality, and business services may be somewhat insulated by inelastic demand and a probable shift towards domestic tourism in response to rising travel costs. That said, the growing presence of small and informal businesses introduces vulnerability, given their sensitivity to economic shocks. In the latest quarter, formal sector employment decreased by 1.5%, while the informal and household sectors saw declines of 3.5% and 2.5% respectively, suggesting heightened pressure on smaller businesses. Regional disparities also persist, with notable job losses in provinces such as the Northern Cape and North West, highlighting localised fragilities and divergent informal sector dynamics. For example, while quarterly employment in the Northern Cape fell by 8.5%, informal employment increased by 12.5%. It is likely that as the broader economy remains sluggish, growth in the informal sector is likely to continue and will require an operating environment that is less susceptible to shocks.
Demographically, women shouldered most of the recent job losses. Although more women have become employers or self- employed since 2008, the number of women employers is declining, and their proportions in these types of employment remain less favourable compared to men. Furthermore, the absorption rate for individuals aged 15-34 stands at just 27%, with an unemployment rate exceeding 50%. These figures suggest that the most vulnerable groups may face increasing hardship due to global disruptions, and that SA's socioeconomic challenges may not yet have peaked.
In summary, while the long-term outlook remains cautiously constructive, the prolonged conflict in the Middle East could severely impair near-term performance. Increased volatility in economic cycles could further destabilise the labour market and exacerbate pre-existing constraints, particularly as the risk of liquidations grows. Certain sectors and demographic segments are especially vulnerable, and with an underutilised labour force and a long-term unemployment rate of nearly 80%, a country within a region that is expected to experience the fastest pace of population growth must act quickly to mitigate further job losses amid rising global competition and innovation.
Week in review
Manufacturing output (not seasonally adjusted) increased slightly by 0.9% year-on- year (y/y) in March, reflecting a rebound from a 2.3% contraction (previously -2.8%) in February. This marked the first monthly annual increase following four consecutive months of negative growth. On a seasonally adjusted basis, which is more relevant for quarterly GDP calculations, output improved by 0.8% month-on-month (m/m), partially rebounding from a 1.8% monthly decline in February. However, this was insufficient to translate into positive quarterly growth and, as such, output declined by 1.0% quarter- on-quarter (q/q) in 1Q26, suggesting that the manufacturing sector weighed on GDP growth in the first quarter of 2026. We expect the sector to remain under pressure in the near term amid the ongoing Middle East turmoil and rising energy-related production and freight transport costs.
Mining production (not seasonally adjusted) expanded by 2.5% y/y in March, slowing from a 9.7% increase in February. On a seasonally adjusted basis, mining output declined sharply by 5.1% m/m reversing the 3.0% increase recorded in February. The largest positive contributors to the monthly annual increase were platinum group metals, gold, and manganese ore, while coal was the main detractor. Overall, mining output increased by 0.6% q/q, suggesting that the sector made a positive contribution to GDP growth in the first quarter of 2026.
Week ahead
On Wednesday, data on consumer inflation for April will be released. Headline inflation ticked up to 3.1% y/y in March from 3.0% in February. Monthly pressure was 0.6%, mainly due to core inflation. Core inflation was 3.2%, up from 3.0% previously, with monthly pressure of 0.8%. Services inflation recorded 0.9% m/m, and 4.2% y/y, mainly driven by housing, education, restaurants and hotels, and there was already some pressure on public transport. Core goods inflation was 0.6% m/m and 1.0% y/y. Average fuel prices increased by 1.2% m/m and were 8.7% lower than in March last year. Food and non- alcoholic beverages (NAB) inflation slowed to 3.6% y/y from 3.7% y/y in February. There was no monthly pressure as higher vegetables and NAB costs were mitigated by meat deflation. Inflation should accelerate to 3.8% in April, mainly reflecting the fuel price shock.
Also on Wednesday, retail sales data for March will be released. Retail sales growth eased sharply to 1.6% y/y in February, down from 4.4% in January. Sales volumes declined by 1.0% m/m, reversing the 0.9% gain in the previous month. As a result, volume sales over the past three months are only 0.5% higher compared to the preceding three months. Importantly, this data largely predates the war in the Middle East, which has since heightened uncertainty and unsettled oil markets, developments that are likely to dampen sentiment and weigh on consumer activity going forward.
