Kenya’s private sector employment declined in May for the first time in 16 months, as businesses responded to reduced capacity pressures following a slowdown in new orders across all monitored sectors, according to Stanbic Bank.
According to the May Stanbic Bank Kenya Purchasing Managers’ Index (PMI) report, private sector firms reduced workforce numbers primarily by cutting temporary contract staff, bringing to an end a 15-month run of uninterrupted job creation.
“Private sector businesses in Kenya signaled a renewed decline in staff numbers during May, ending a 15-month period of continuous job creation,” read part of the report.
Which Sectors Reduced Workforce Numbers
According to surveyed business sectors, weaker demand led to a fall in new orders, reducing the need for additional labour.
Businesses reported having sufficient capacity to process existing workloads, prompting some employers to shorten or terminate temporary contracts.
The decline was most evident in the agriculture and wholesale and retail sectors, which recorded reductions in headcount.
The Stanbic PMI report noted that construction and services firms recorded declines in both output and new orders, while manufacturers were the only businesses to report growth in production during the month.
The slowdown in demand also prompted companies to reduce staffing levels for the first time in 16 months, primarily by cutting temporary contract workers.
“Panelists reported that the fall often reflected reductions in temporary contract staff. The pace of contraction was only marginal, however, as headcount reductions in the agriculture and wholesale & retail categories were partly offset by growth at construction and manufacturing companies. Employment was stable at service providers,” read part of the report.
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Stanbic PMI Falls to 46.6 as Business Conditions Deteriorate
Kenya’s private sector saw a sharper deterioration in business conditions in May, as declining demand, rising costs and weaker sales weighed on firms.
The PMI fell to 46.6 in May from 49.4 in April, marking the steepest decline in private sector health since July 2024.
According to the report, the downturn was driven by faster contractions in business activity and new orders, with firms reporting weaker customer demand as inflationary pressures squeezed household and business budgets.
New sales fell at the fastest pace since mid-2025, as many customers delayed or reduced spending due to rising prices.
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The Stanbic PMI report noted that firms also scaled back input purchases for the first time in eight months, as weaker sales, cash-flow constraints, and higher operating costs discouraged spending.
As a result, inventories remained largely unchanged despite improved supplier performance.
Inflationary pressures intensified during the month, with overall input costs rising at the fastest pace since November 2023.
Despite the challenging operating environment, the PMI reported that firms expressed greater confidence in future business prospects.
Expectations for output over the next 12 months reached their highest level since February 2023, supported by plans to increase advertising, diversify products and expand online operations. Optimism was reported across all major sectors of the economy.
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