South Africa’s Job Market Strengthens as Unemployment Falls and Labour Data Gets an Overhaul

South Africa’s unemployment landscape has experienced a notable improvement, with the official jobless rate dropping by 1.3 percentage points in the third quarter of 2025. The figure now stands at 31.9%, compared to the higher rate of 33.2% recorded during the second quarter. This decline marks a welcome development for the local economy, reflecting a moderate recovery in employment levels and a stabilisation in some key sectors that had previously faced strain.

Key Takeaways

• Unemployment Rate Falls to 31.9%: South Africa’s official jobless rate declined by 1.3 percentage points in the third quarter of 2025, marking the lowest level in over three years and signalling tentative signs of recovery in several labour-intensive sectors.
• New Labour Force Definitions Introduced: Stats SA updated its classification system, replacing “Not Economically Active” with “Outside the Labour Force” and adding the “Potential Labour Force” category, offering a clearer, more modern view of employment dynamics.
• Broader Labour Underutilisation Measures Adopted: Alongside the standard unemployment rate, new indicators now track time-related underemployment and potential labour force participation, providing a fuller picture of South Africa’s hidden unemployment and underused labour capacity.

Adjustments to Statistical Definitions and Data Compilation

Statistics South Africa (Stats SA), the national statistical service, announced that it has revised certain definitions and methodologies used to compile labour market data beyond the standard unemployment rate. These methodological updates aim to provide a more accurate and nuanced reflection of the labour market’s true dynamics. One of the most significant changes relates to the reclassification of the “Not Economically Active” population, which has now been replaced with the broader category of those “Outside the Labour Force.” In addition, Stats SA has introduced the concept of the “Potential Labour Force” to capture individuals who are on the fringes of employment but not formally counted as unemployed. This revision aligns South Africa’s reporting with international labour standards used by the International Labour Organisation (ILO), ensuring more globally comparable data. Interestingly, such changes are common in developing economies where informal work and underemployment are harder to measure accurately.

Understanding the New Labour Force Categories

Individuals who fall within the “Outside the Labour Force” category are defined as persons aged between 15 and 64 years who are neither employed nor unemployed during the reference period. These individuals may include students, homemakers, retirees, or those who have chosen not to engage in employment at present. The “Potential Labour Force,” on the other hand, represents a newly refined group that encompasses people who are not officially in the labour force but still show some level of attachment to the job market. This includes individuals who are available for work yet not actively seeking employment, as well as those who are searching for jobs but currently unavailable to start work. Experts note that understanding this distinction is key to analysing long-term job creation trends. For instance, a large “Potential Labour Force” can mean there’s untapped human capital waiting for the right economic conditions to re-enter the workforce.

Impact of Redefinitions on Comparability of Data

Due to these definitional adjustments, the statistical agency has cautioned that estimates for the informal employment sector in the third quarter of 2025 cannot be directly compared with figures from previous periods. This limitation arises because of the structural changes made in categorising workers and classifying employment activities. Stats SA noted that these revisions are part of an ongoing effort to modernise the country’s labour market reporting system and to align it with international statistical standards.

Discouraged Job Seekers and Potential Labour Force Expansion

Part of this reduction in the labour force is attributed to the increase in discouraged job seekers, individuals who have lost hope of finding work. Their numbers rose by 36,000, reaching a total of 3.5 million people. Other job seekers who are available for work but not actively seeking employment increased by 130,000 to reach 965,000 individuals. Meanwhile, those who are actively seeking employment but temporarily unavailable to work also saw an increase of 64,000, totalling 83,000 people. As a result, the combined “Potential Labour Force” rose by 230,000 individuals, reaching 4.5 million during the third quarter. Economists note that the persistence of discouraged job seekers points to deeper issues such as skill mismatches and limited job mobility. For example, young graduates often find themselves qualified but lacking the work experience that employers demand, a classic catch-22 in South Africa’s labour environment.

Population Outside the Labour Force Sees a Marginal Increase

The category now referred to as “Outside the Labour Force,” previously labelled “Other Not Economically Active Population,” registered a smaller increase of 8,000 people, bringing this group’s total to 12.4 million. These figures highlight subtle yet important changes in how individuals are distributed across different labour market categories, offering a more layered understanding of employment dynamics. Interestingly, South Africa’s labour force participation rate, currently hovering just above 58%, remains below the global average of about 61%. This suggests that a significant portion of working-age citizens remains disengaged from formal employment, often due to structural barriers like transport costs, childcare responsibilities, and regional inequality.

These movements across employment and unemployment categories culminated in the official unemployment rate dropping from 33.2% in the second quarter of 2025 to 31.9% in the third quarter of the year. While this represents tangible progress, it also underscores the complexity of South Africa’s labour market and the need for continued policy focus on job creation, training, and inclusive growth.

Changes in Composite Labour Underutilisation Rates

According to the QLFS data, the combined rate of unemployment and time-related underemployment declined by 1.2 percentage points, reaching 34.9% in the third quarter of 2025. Similarly, the combined rate that includes both unemployment and the potential labour force dropped by 0.6 percentage points to 42.4% compared with the previous quarter. Finally, the broadest composite measure of labour underutilisation, which combines unemployment, time-related underemployment, and the potential labour force, stood at 44.9% for the third quarter of 2025. These figures, while still high, indicate a slow but steady narrowing of the employment gap. Analysts say that even a 1% improvement in underutilisation could translate to roughly 200,000 more South Africans being productively engaged in the economy.

The Closest Comparison to the Former Expanded Rate

Among these various measures, the combined rate of unemployment and the potential labour force, currently recorded at 42.4%, most closely aligns with what was previously known as the expanded unemployment rate. This metric provides a near-equivalent comparison to earlier data sets, enabling analysts and policymakers to track trends with a degree of continuity despite methodological shifts. It is worth noting that this expanded rate has hovered above 40% for most of the past decade, reflecting deep-rooted structural challenges. However, even small improvements in this figure can significantly affect consumer confidence and investment sentiment.

The newly introduced underutilisation measures highlight the diverse circumstances of individuals within South Africa’s workforce and their varying levels of connection to the labour market. They offer a more refined lens through which to interpret employment trends, capturing nuances that the official unemployment rate alone may overlook. By adopting these measures, the statistical agency aims to improve transparency and inform policy decisions aimed at boosting participation and productivity in the economy. Ultimately, this evolution in labour data reporting may prove pivotal for shaping smarter employment strategies. Policymakers, for instance, could use these metrics to design targeted interventions such as youth skills programmes, small business incentives, or retraining initiatives for the green economy, areas that are expected to drive job creation over the next decade.

Conclusion

South Africa’s latest employment figures show cautious optimism as the unemployment rate drops and new data frameworks bring clarity to the nation’s complex labour environment. While the 1.3 percentage point decline reflects gradual progress, structural issues such as discouraged job seekers and underemployment remain significant challenges. The introduction of refined definitions and broader underutilisation measures signals a shift toward more transparent and internationally aligned labour reporting. Experts believe that if this positive trend continues and is supported by targeted economic policies, infrastructure investment, and skill development programmes, South Africa could begin to unlock its untapped workforce potential and move closer to sustainable, inclusive growth.