Kenyan companies cut jobs after 15-month hiring streak amid weaker demand

Kenyan businesses cut jobs in May for the first time in 15 months as weakening demand and rising costs spill into the labour market, pushing companies to tighten spending and scale back expansion plans.

Private sector firms reduced staffing levels after more than a year of continuous job creation, according to data from Stanbic Bank Kenya’s latest Purchasing Managers’ Index (PMI), with many companies citing cuts to temporary contract workers amid deteriorating business conditions.

The job cuts mark a reversal after more than a year of resilience in private-sector employment, adding to concerns about job creation at a time when thousands of young Kenyans enter the labour market each month.

“Private sector businesses in Kenya signalled a renewed decline in staff numbers during May, ending 15 months of continuous job creation. Panelists reported that the fall often reflected reductions in temporary contract staff,” the survey said.

The headline PMI fell to 46.6 in May from 49.4 in April, according to the survey, remaining below the 50-point threshold that separates expansion from contraction and indicating a further deterioration in business activity.

New orders declined for the third straight month and at the fastest pace since July 2025 as customers cut back spending amid tighter household budgets. Output also contracted for a third consecutive month, reflecting weaker demand across manufacturing and services.

“Consumer resistance to spend, alongside rising costs, contributed to contractions in new orders and output. These declines may stem from the week-long disruption to business activity because of nationwide protests by transportation sector players that constrained movement,” said Christopher Legilisho, economist at Standard Bank.

The slowdown raises concerns that startups and technology-enabled businesses serving consumers could face softer transaction volumes as households rein in discretionary spending.

The survey found that companies are prioritising cost containment over workforce expansion even as operating expenses accelerate. About 99% of participating businesses reported no change in staff costs during May, suggesting companies are preserving cash by freezing salaries while managing higher operating expenses.

Still, Kenyan firms are optimistic about the year ahead. Business confidence rose to its highest level since February 2023, the Stanbic Kenya survey found, with companies expecting stronger activity supported by investments in advertising, product diversification, and digital sales channels.