Japhet Ruto, a journalist at TUKO.co.ke, brings more than eight years of expertise in finance, business, and technology journalism, delivering thorough insights into economic trends in Kenya and worldwide.

Due to a decline in demand for goods and services, about 25% of businesses in the Kenyan manufacturing and service sectors have reduced full-time employment in the past three months, further exacerbating the labour market crisis.

This is according to a Central Bank of Kenya (CBK) survey of chief executive officers (CEOs) of more than 1,000 companies.

The survey revealed that in June 2025, 23.5% of manufacturing and 23.9% of service-oriented businesses, including the hospitality industry, had cut back on full-time employees compared to the end of March.

"The elevated cost of doing business, cashflow challenges, and muted consumer demand are some of the factors that could constrain growth at the company level," the survey stated.

Only 11.8% and 10.9% of manufacturing and service companies, respectively, grew their full-time workforces during the review period, according to the same research.

The majority, 65.2% in the services sector and 64.7% in manufacturing, kept their workforce levels constant, indicating a cautious recruiting approach in the face of declining demand for goods and services.

While 52.9% of manufacturing companies reported growth in sales, 41.2% told CBK they had observed a drop from March levels.

While 26.1% noted revenues remain steady, 38% experienced a fall, and 26.1% saw a growth in the services sector.

The reduction in full-time jobs occurred during this period, with 47.1% of manufacturers responding to lower sales by cutting production.

In a different CBK study that gathered market predictions from 302 non-banking businesses, including hotels and manufacturing, and 37 banks, almost one-third of the businesses said they would not be recruiting additional employees this year.

"As for hiring in 2025, non-bank players had conflicting predictions. 34% of the respondents said they would not hire because of the increasing taxes, delayed government payments, and growing operational costs.

They also said they would use ICT to eliminate manual procedures," the survey stated.

Job seekers are negatively impacted by the outlook in an economy that generated 782,300 new jobs last year, compared to 848,100 the year before.

According to data from the Kenya National Bureau of Statistics (KNBS), 90% of those jobs were in the informal sector.

The slowdown was attributed to high financing costs, farm-destroying floods, and economic disruptions following the protests against the Finance Bill 2024.

The International Monetary Fund (IMF) projected a slower economic growth for the country in 2025.

Source: TUKO.co.ke