Kenya adds 717,000 jobs in 2025

Kenya's labour market expanded significantly in 2025, with the informal sector absorbing 717,000 new workers—a growth rate of 4.1 percent that underscores the economy's reliance on non-formal employment. According to the 2026 Economic Survey released by the Kenya National Bureau of Statistics (KNBS), total informal sector employment climbed to 18.1 million workers, up from 17.4 million in 2024, cementing Kenya's position as an East African employment engine despite persistent formal sector constraints.

This expansion reveals a nuanced picture of Kenya's labour dynamics. While the headline figure appears positive, it masks structural vulnerabilities in the economy: formal job creation remains anaemic, pushing millions toward self-employment, hawking, and gig work with minimal social protection or wage stability. The informal sector now represents approximately 80–85% of Kenya's total employment base, a ratio unchanged for over a decade despite repeated pledges to formalize the economy.

### Why is informal sector growth masking deeper economic challenges?

The 717,000 new jobs reflect not only entrepreneurship but also underemployment. Many Kenyans are forced into informal work because formal employers are hiring slowly. Manufacturing and services sectors, historically the anchors of formal employment, have faced headwinds from elevated interest rates, inflation (which peaked at 17.1% in 2023), and weak consumer demand. Manufacturing employment actually contracted in 2024–2025, with textile, automotive, and food processing firms shedding workers or freezing recruitment. The informal sector absorbs these displaced workers and new entrants to the labour force, creating a statistical "cushion" that obscures joblessness.

Investor implications are mixed. On one hand, informal sector dynamism signals resilience and entrepreneurial energy—critical for grassroots economic activity and poverty mitigation. On the other hand, the lack of formal job growth suggests weak corporate earnings growth, limited tax revenue generation, and reduced consumer purchasing power in the higher-income brackets. Multinational firms and blue-chip companies operating in Kenya face a shrinking middle-class customer base as wage employment stagnates.

### What policy shifts could unlock formal sector job creation?

The government has signalled intent to reduce corporate tax rates and streamline business registration to encourage formalization, but execution remains sluggish. Devolved county governments, which control skills training and local economic zones, have inconsistent track records. Without credible reforms to energy costs, logistics, and regulatory burden, formal hiring will remain depressed. The IMF and World Bank continue to pressure Kenya to improve the business environment; firms cite power outages, port inefficiency, and bureaucratic delays as primary constraints.

For diaspora investors and regional operators, Kenya's labour surplus presents opportunity: wages remain competitive against South Africa and Nigeria, and the young, growing workforce is increasingly tech-literate. However, firms must invest in training, as skills mismatches persist. The informal sector's growth also signals untapped consumer potential—millions of micro-entrepreneurs lack access to credit, insurance, and digital payment infrastructure, creating adjacencies for fintech and microfinance platforms.

The 2025 employment data underline Kenya's paradox: growth without transformation. Until formal sector job creation accelerates, Kenya's development ceiling will remain constrained.

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