Unemployment: Comprehensive Analysis of Its Impact on Saudi Economy and Stock

Unemployment is generally defined in economics as the situation where individuals in the labor force (i.e., people of working age who are able and willing to work) cannot find suitable job opportunities despite actively seeking employment. In the Saudi context, the General Authority for Statistics (GASTAT) employs a standardized methodology to determine the unemployment rate, based on periodic surveys covering all regions of the Kingdom and differentiating between Saudis and non-Saudis, as well as by gender and age group. The unemployment rate is calculated by dividing the number of active job seekers by the total labor force, and this ratio is reviewed quarterly to provide an accurate picture of the labor market's condition. This indicator is one of the most important macroeconomic indicators, reflecting the availability of job opportunities and the growth of various economic sectors, and is used to monitor the impact of government programs such as Vision 2030 and localization initiatives. The importance of precise measurement is highlighted in guiding economic policies, as inaccurate estimates may mislead decision-makers about the effectiveness of employment programs and economic reforms.

The Kingdom of Saudi Arabia has witnessed a significant decline in unemployment rates during 2024 and 2025. Official data from the General Authority for Statistics indicates that the overall unemployment rate (for both Saudis and non-Saudis) reached 2.8% in the first quarter of 2025, marking one of the lowest levels historically in the Saudi labor market. Additionally, the participation rate of Saudis in the labor force increased to 51.3% during the same period, reflecting the success of government initiatives in attracting citizens to the labor market. For Saudi males, the unemployment rate dropped to 4%, a notable decrease compared to previous years. These improvements are attributed to several factors, including localization programs, the expansion of major projects such as NEOM and Qiddiya, and increased training and vocational rehabilitation opportunities for youth and women. This upward trend in participation and declining unemployment is expected to continue with ongoing government incentives and investment in non-oil sectors.

The causes of unemployment in Saudi Arabia are linked to several economic, social, and structural factors. One of the primary reasons is the mismatch between the skills of some job seekers and the changing requirements of the labor market, especially with the shift towards a knowledge and technology-based economy. Additionally, the reliance of certain sectors on foreign labor plays a role in reducing job opportunities for citizens. Furthermore, fluctuations in oil prices and global economic conditions affect the private sector's ability to create new jobs. Other factors include high expectations regarding salaries and benefits, which may render some jobs unattractive to Saudis or unavailable to them. The Saudi government is working to address these causes through localization policies, developing education and vocational training, encouraging entrepreneurship, and enacting legislation that supports local employment and enhances labor market flexibility.

The unemployment rate is a sensitive macroeconomic indicator closely linked to economic growth and social stability. High unemployment often indicates economic slowdown, leading to decreased household income and reduced consumption, which negatively impacts corporate profits and productive sectors. Conversely, declining unemployment enhances citizens' purchasing power, increases domestic demand for goods and services, and stimulates growth in sectors such as construction, real estate, and retail. In Saudi Arabia, movements in unemployment are also related to government support policies, as reducing support programs with rising employment improves the efficiency of public spending. Unemployment rates are also indicators monitored by financial institutions and investors to assess growth opportunities and risks in the Saudi market, especially in light of Vision 2030, which focuses on diversifying the economy and increasing investments in non-oil sectors.

Unemployment rates directly and indirectly affect the performance of the Saudi stock market (Tadawul). When unemployment declines, it is viewed as a positive indicator of the national economy's health, prompting investors to increase their confidence in local companies, particularly those operating in consumer and construction sectors. This often leads to increased demand for shares of these companies and a rise in their market value. Conversely, in cases of rising unemployment, consumer demand may decline, putting pressure on corporate profits, which could lead to a reassessment of stock prices. Financial institutions and analysts closely monitor unemployment data when studying various sectors, as unemployment is an early indicator of business cycle shifts and the impact of economic policies. It is noteworthy that the relationship between unemployment and stocks is not always linear, as it may be influenced by external factors such as oil prices, government policies, and changes in global markets.

The cement and building materials sector is one of the most closely linked sectors to unemployment rates and economic growth in the Kingdom. When unemployment decreases and spending on infrastructure projects increases, demand for cement and building materials rises, leading to increased sales and profits for companies operating in this sector. In recent years, there has been an expansion in mega-projects such as NEOM and Qiddiya, which has boosted demand for products from companies like Hail Cement (3001) and Yamama Cement, among others. Conversely, if unemployment rises and economic activity slows, demand for building materials declines, and companies face challenges in maintaining their production and profit levels. Additionally, localization of jobs in the sector contributes to creating local job opportunities, but it may increase wage costs, requiring companies to improve productivity and reduce costs.

Hail Cement Company (Symbol: 3001) operates in a sensitive sector directly affected by labor market transformations and unemployment. The company has benefited from improved employment rates and increased government and private projects in northern Saudi Arabia, where its main plant is located. The increased local demand for cement due to declining unemployment and rising consumption has positively reflected on the company's sales and financial results recently. However, the company faces challenges such as fluctuations in energy prices, shipping costs, and increasing competition from local and regional companies. Hail Cement focuses on improving productivity through expansions and investment in modern equipment, in addition to its commitment to localization policies and providing job opportunities for citizens, which supports local market stability and enhances the company's reputation in the community.

Localization policies are fundamental pillars in the Kingdom's strategy to reduce unemployment. The government has launched several programs such as 'Nitaqat', which mandates companies to maintain specific ratios of local employment, and the 'Hafiz' program for training job seekers. Vision 2030 also focuses on empowering youth and women, and developing the technical and vocational skills required in the Saudi labor market. Government initiatives have enhanced Saudi participation in vital sectors and provided necessary support for small and medium enterprises, which are a key platform for job creation. These efforts have reflected in the declining unemployment rate and rising participation in the labor force during 2024 and 2025. The government continues to monitor and update policies to ensure sustainable progress in reducing unemployment and enhancing the competitiveness of the national economy.

In recent years, there has been a notable increase in the participation rate of Saudi women in the labor market, as a direct result of women's empowerment programs launched by the government under Vision 2030. These programs included facilitating women's entry into new sectors, providing flexible work environments, and launching training initiatives targeting graduates and professionals. This has contributed to reducing the unemployment rate among women and opening additional job opportunities in sectors such as education, health, technology, and financial services. Additionally, the increased participation of women has helped raise the overall participation rate of the Saudi labor force and contributed to enhancing economic and social stability. Continued focus on empowering women is a crucial factor in achieving unemployment reduction goals and comprehensive development.

Vocational training and education programs are essential tools for combating unemployment in the Kingdom. The Saudi government has launched several initiatives aimed at developing youth skills and preparing them for the changing labor market, including technical education and vocational training programs managed in collaboration with the private sector. These programs help bridge the gap between labor market requirements and graduates' skills, enhancing employment opportunities and reducing reliance on foreign labor. Specialized training courses and digital initiatives have also helped improve the efficiency of workers and facilitate their transition between sectors. Investing in education and training is one of the critical factors in ensuring sustainable economic growth and reducing unemployment rates in the long term.

The unemployment rate in Saudi Arabia is closely linked to the level of local consumption, especially in the housing and construction sector. When unemployment decreases and incomes rise, demand for home purchases and new projects increases, raising the demand for cement and building materials. Companies like Hail Cement (3001) benefit directly from this dynamic, as their sales increase with improved economic conditions and declining unemployment. Conversely, if unemployment rises and incomes decline, consumer demand decreases, leading to reduced demand for construction and essential materials, posing a challenge for companies in the sector. Therefore, unemployment data is an important indicator in predicting movements in the real estate market and the building materials sector.

The cement sector in Saudi Arabia is experiencing strong competition among national companies such as Hail Cement (3001), Yamama Cement (3000), Madinah Cement (3030), and Qassim Cement (3010). The performance of these companies depends on the volume of construction projects, production efficiency, and the cost of local labor. Declining unemployment and increased localization may lead to higher operational costs, but it enhances social stability and reduces reliance on foreign labor. Companies also heavily depend on local demand supported by government spending on infrastructure projects, making the sector sensitive to any shifts in unemployment rates or economic growth. Companies continuously work to improve efficiency and reduce costs to face competition and economic fluctuations.

Despite the significant improvement in unemployment rates in Saudi Arabia in recent years, there are ongoing challenges that require continuous addressing. Among the most prominent challenges is the need for education and training to keep pace with the changing labor market requirements, improving employment efficiency in the private sector, and increasing the participation of women and youth in productive sectors. Additionally, global economic fluctuations and oil prices remain influential factors in the Saudi economy's ability to create new job opportunities. Conversely, Vision 2030 and ambitious development programs provide promising prospects for improving the labor market and increasing employment, especially with ongoing investment in mega-projects and diversifying national income sources.

Although company performance is determined by multiple factors, unemployment has a clear impact on the results of cement companies like Hail Cement (3001). Increased local demand due to declining unemployment and improved construction projects positively reflects on the company's revenues. Available financial indicators suggest that Hail Cement achieved moderate cash distributions in 2024, with varying price-to-earnings ratios based on quarterly profits. Revenue growth is directly linked to the volume of government and private projects, while operational costs are affected by labor and energy costs. The company focuses on sustaining profits through productivity improvements and cost control, especially amid ongoing competition in the sector.