Saudi unemployment rate set to drop further to 7.8% by end of year, Jadwa says

The number of foreign workers in the kingdom's labour market also rebounded to pre-Covid-19 levels in 2022 to reach 7.3 million

A Saudi employee prepares coffee at a shop in Tabuk. Over the past three years, female representation in the kingdom's labour force has risen to 36 per cent from 20 per cent. Reuters

The unemployment rate among Saudis is expected to decline further this year, falling to 7.8 per cent by the end of December, after a sharp drop in 2022, as the kingdom's non-oil sector continues to expand, according to estimates by Jadwa Investment.

Unemployment among citizens dropped to 8 per cent in the fourth quarter of 2022, from 9.9 per cent in the third quarter, the General Authority for Statistics (Gastat) said last month.

The overall unemployment rate in the Arab world's largest economy, for Saudis and non-Saudis, was at 4.8 per cent in the fourth quarter, down from 5.8 per cent in the previous quarter and 6.9 per cent a year ago, the authority said.

The kingdom's overall improvement of the labour market in 2022 was “better than our expectations” and reflects the broader growth seen in the Saudi economy, Jadwa said in a new report.

“More specifically, unemployment dropped by 3 percentage points during 2022, and we believe this improving trend will continue during the coming years. In light of this, we expect unemployment to see further declines and reach 7.8 per cent by end of 2023,” the Saudi investment bank said.

Saudi Arabia's gross domestic product exceeded $1 trillion for the first time in 2022 as its economy grew 8.7 per cent, driven by oil and non-oil sector growth in the country.

The kingdom recorded the highest annual growth rate among the world’s 20 biggest economies in 2022, according to the Organisation for Economic Co-operation and Development.

Its non-oil economy has continued to expand this year and business activity remained robust in March on increasing output and new business, further supporting employment growth in the kingdom, according to the Riyad Bank purchasing managers’ index.

The country's PMI reading, which hit 58.7 in March, signalled a marked improvement in operating conditions, and one that was among the strongest reported since early-2015.

As part of Saudi Arabia's ambitious Vision 2030 agenda, aimed at diversifying its economy away from oil, the kingdom plans to lower the unemployment rate to 7 per cent, from a previous high of 11.6 per cent, while also increasing the participation of women in the workforce to 30 per cent from 22 per cent.

Last year, the number of Saudi workers in the private sector rose by 15 per cent annually to 2.2 million, according to Jadwa.

Labour force participation also rose during the year to 52.5 per cent from 51.5 per cent in 2021, with higher participation among both genders and the youth.

“During the past three years, female labour force participation has seen tremendous improvement … reflecting the overall improvement in labour policies,” the report said.

Female representation in labour force increased to 36 per cent over the past three years from 20 per cent, according to Jadwa.

The increase was spurred by expanding childcare and transport services, which added to the new job opportunities in developing sectors such as tourism, leading to more women joining the labour market, it said.

“We expect female participation rate to continue rising in the years ahead,” it said.

In terms of sectors, the largest annual rise in the hiring of Saudis took place in three sectors, according to Gastat data.

They are administrative and support services (which mainly comprises rental and leasing services, travel agencies, landscape and building services); professional and technical services (covering legal services, accounting, architecture and engineering, marketing and others) and construction.

The three sectors accounted for 56 per cent of total new Saudi recruitments in 2022, on a net basis.

Accommodation and food services also accounted for 10 per cent of new Saudi hires in 2022, on a net basis, with Saudi worker numbers in this sector rising by 30 per cent annually.

Meanwhile, the number of foreign workers in the kingdom's labour market also rebounded in 2022 to pre-pandemic levels to reach 7.3 million, up from 6.4 million at the end of 2020, according to Gastat.

The majority (55 per cent) of new non-Saudi recruitments on a net basis were in two sectors — construction and agriculture, which grew due to developments in giga-projects and the various Vision 2030 initiatives.

Meanwhile, the wholesale and retail sector recorded the largest departure of foreign workers during the year, “which is likely affected by the Ministry of Human Resources localisation initiatives in recent years in related sectors, such as cinemas, shopping malls and jewellery shops”, Jadwa said.

Overall, the “significant improvement” in the labour market for Saudis during the past few years is associated with strong economic growth, particularly in the non-oil sector, the report said.

“Since we expect the non-oil sector to continue growing at 5.5 per cent and 5.6 per cent in 2023 and 2024, respectively, we believe this improving trend is likely to continue,” Jadwa said.

The continuous growth in tourism activities around the kingdom has attracted many Saudi jobseekers to work in venues such as hotels, restaurants, entertainment companies and museums.

Sectors such as transport are also expected to add more job opportunities both in new and existing projects.

Meanwhile, intensified localisation efforts will also support Saudi employment in sectors such as wholesale and retail.

“Looking ahead, we expect more employment opportunities for Saudis as a result of the growth in several sectors,” the report said.