Thailand's unemployment rate remains relatively low, but the labour market is showing signs of weakening, says SCB Economic Intelligence Center (EIC), the research arm of Siam Commercial Bank.
According to Yunyong Thaicharoen, chief economist at EIC, the unemployment rate was 0.94% of the workforce in the first half of 2026, edging up from 0.90% year-on-year.
While the headline figure remains low, there are evident signs of labour market fragility across several dimensions, he said.
The number of unemployed persons increased by about 35,000, or 9.8% year-on-year, to 397,000 in the first half of this year, according to EIC's analysis of data from the National Statistical Office and the Department of Business Development.
Meanwhile, the unemployment rate among Section 33 social security contributors, who are formal employees in registered establishments, increased from 2.07% to 2.37%, far outpacing the increase in the overall unemployment rate.
This suggests mounting pressure in the labour market, as businesses have begun implementing layoffs, said Mr Yunyong.
Youth unemployment (ages 15-24) declined slightly but remained elevated at 5.14%, more than five times the overall unemployment rate. This highlights persistent structural problems in Thailand's labour market, particularly the mismatch between workers' skills and labour market demand.
Another dimension is underemployment, as the number of employees working fewer than 35 hours per week rose by around 400,000, an increase of 7.4%.
Similarly, the number of "quasi-unemployed" workers, who are those working 0-20 hours per week in agriculture or 0-24 hours per week outside agriculture, increased by 4.9% to 3.33 million people.
These figures indicate many workers remain employed, but are unable to secure sufficient working hours or fully utilise their productive capacity.
Meanwhile, working hours continue to decline, as average weekly working hours fell from 42.57 to 42.42 hours. The reduction occurred among both formal employees (-0.2%) and self-employed workers (-0.5%), suggesting that weakening labour demand is broad-based rather than confined to specific groups, said Mr Yunyong.
Businesses typically reduce working hours and overtime before resorting to layoffs, meaning they are an early warning signal of deteriorating labour market conditions.
This trend is consistent with business registration data that shows business closures increased by 12.5% year-on-year during the first half of 2026.
Overall labour income is also declining, as average monthly wages including bonuses and overtime fell from 16,363 baht to 16,300 baht, down 0.4% year-on-year.
Wages for formal sector workers increased by 0.9%, although this was considerably slower than the nearly 3% growth recorded a year earlier.
By contrast, earnings among self-employed workers, who account for roughly one-third of total employment, fell sharply by 2.2%, highlighting their greater vulnerability.
After adjusting for inflation, real wages deteriorated even further. The real wage index dipped to 96.8 (2019 = 100) in the second quarter of 2026, the lowest level since the pandemic.
This index indicates workers' purchasing power has not only failed to recover to its pre-pandemic level, but weakened again this year, underscoring the cumulative erosion of household purchasing power caused by prolonged income weakness, noted EIC.
Structural Challenges
"Thailand's labour market can be characterised as structural at the core and cyclical at the margin. Its underlying vulnerabilities stem from long-standing structural weaknesses, while recent economic headwinds are amplifying and exposing these problems more clearly," said Mr Yunyong.
"Structurally, Thailand is becoming a fully aged society, increasing the dependency burden on the working-age population. Yet the skills of many workers remain poorly aligned with the needs of businesses and emerging industries."
Furthermore, although Thailand continues to attract substantial foreign direct investment (FDI), the associated employment opportunities, income gains, and technology and skills transfer have yet to benefit Thai workers broadly.
These structural weaknesses are being compounded by cyclical pressures. The conflict in the Middle East has pushed up energy costs, adversely affecting working hours, wages, and employment in sectors directly exposed to higher energy prices, including transport, construction and tourism.
Meanwhile, small and medium-sized enterprises, which constitute a major source of employment and are generally labour-intensive, are recovering gradually amid weak domestic demand, elevated costs and tight liquidity conditions.
These factors constrain employers' ability to maintain employment, raise wages, or hire new workers, potentially creating additional labour market pressures in the period ahead, he noted.
"The persistently low unemployment rate should not be interpreted as evidence of a fundamentally healthy labour market. Instead, many workers who lose formal sector jobs move into informal employment, freelance work, or occupations with unstable incomes, rather than being classified as unemployed," said Mr Yunyong.
"The labour market continues to suffer from a skills mismatch, both in terms of workers lacking the skills demanded by employers and workers whose education or qualifications exceed job requirements. As a result, many individuals remain employed below their potential, receive lower wages than their qualifications warrant, and face limited career advancement opportunities."
Consumption and Debt
A weaker labour market directly affects private consumption and households' debt-servicing capacity.
When labour income recovers slowly or declines, households become more cautious about spending, reducing sales for small businesses that depend on domestic demand.
Businesses respond by reducing working hours, postponing wage increases and slowing hiring, further suppressing household income and consumption. This is consistent with the household debt-to-GDP ratio, which declined to 85.9% in the first quarter of 2026, the lowest level in six years, noted EIC.
The think tank attributed the decline to "constraint-driven deleveraging", where debt growth slows because household income recovery remains weak, causing households to curb spending and new borrowing, while financial institutions tighten lending standards, rather than a genuine improvement in household financial health.
Outstanding household debt still increased by 0.5% year-on-year for the period, driven primarily by borrowing for day-to-day consumption.
Meanwhile, pawnshop lending expanded sharply by 18.3%, indicating that more households are relying on accessible and flexible sources of credit outside the mainstream banking system.
Policy Priorities
During this transition period, government policy should prioritise support for displaced workers through targeted and temporary income assistance to help them meet essential living expenses, said Mr Yunyong.
Such assistance should be accompanied by training programmes and more effective job-matching services that connect workers with actual employment opportunities and facilitate their rapid re-entry into the labour market. Policymakers should also reduce barriers to occupational and geographic mobility, he noted.
Thailand also needs to ensure FDI delivers greater benefits to Thai workers. Investment incentives should be more closely linked to local employment, workforce training, skills and technology transfer, and the participation of domestic suppliers.
The objective should not simply be to attract investment, but to ensure that it generates quality employment, raises productivity, facilitates workers' transition into future-oriented industries, and delivers sustainable improvements in labour incomes, said Mr Yunyong.
