OIT - Employment and Social Trends - May 2026 Update

Employment and Social Trends: May 2026 Update 1 Growing labour market risks of the Middle East crisis

 Employment and Social Trends: May 2026 Update Growing labour market risks of the Middle East crisis

Global  The Middle East crisis has quickly evolved into a global shock to the world of work. Its effects are spreading through higher energy prices and disruptions to transport routes, supply chains, tourism, investment confidence, migration flows and remittances.  Global labour market impacts take time to materialize, but the risks are already significant if oil prices remain high. Under a scenario in which oil prices climb by about 50 per cent above their January– February 2026 average, estimates suggest that: ● Hours worked could fall by 0.5 per cent in 2026 and 1.1 per cent in 2027, equivalent to 14 million and 38 million full-time jobs. ● Real labour income could decline by 1.1 per cent and 3 per cent, equivalent to losses of around US$1.1 trillion and US$3 trillion. ● The unemployment rate could rise by 0.1 percentage points in 2026 and by 0.5 points in 2027, equivalent to an additional 5 million unemployed people in 2026 and 20 million in 2027.  The shock is uneven. Exposure is highest where economies, sectors and workers are most closely linked to Gulf energy flows and energy-intensive supply chains. The Arab States and Asia and the Pacific stand out as the most exposed regions.  Policy responses have begun but remain uneven and constrained by limited fiscal space. A stronger focus on jobs, incomes and business resilience is needed to prevent a temporary energy shock from becoming a longer-lasting setback for decent work. Arab States  Labour market risks in the Arab States are immediate and sizeable. Based on a model designed to capture the faster and broader impact of war in the

needed to prevent a temporary energy shock from becoming a longer-lasting setback for decent work. Arab States  Labour market risks in the Arab States are immediate and sizeable. Based on a model designed to capture the faster and broader impact of war in the region, simulations indicate that hours worked could fall by 1.3 per cent under rapid de-escalation, 3.7 per cent under a protracted crisis and 10.2 per cent under severe escalation.  The severe escalation scenario would imply a shock to hours worked more than twice the scale of the impact during the COVID-19 pandemic. During the pandemic, hours worked in the Arab States declined by 4.4 per cent in 2020.  Around 40 per cent of employment in the Arab States is in high-exposure sectors. These include trade, construction, manufacturing, agriculture, transport, and accommodation and food services. Asia and the Pacific  Spillovers to Asia and the Pacific are already visible and may worsen over time. Under the oil-shock scenario, estimates suggest that hours worked in the region could decline by 0.7 per cent in 2026 and 1.5 per cent in 2027, while real labour income could fall by 1.5 per cent and 4.3 per cent.  Around 22 per cent of workers are in high-exposure sectors. Agriculture, transport, manufacturing and construction face risks, while tourism-dependent economies are under growing pressure.

Key messagesEmployment and Social Trends: May 2026 Update 2 Growing labour market risks of the Middle East crisis

Migration and remittances  Migrant workers are likely to absorb a disproportionate share of the adjustment. In Gulf Cooperation Council (GCC) countries, ILO estimates that for every 1 per cent decline in employment among nationals in times of crisis, employment among nonnationals falls by 4 per cent.

 Migrant workers are likely to absorb a disproportionate share of the adjustment. In Gulf Cooperation Council (GCC) countries, ILO estimates that for every 1 per cent decline in employment among nationals in times of crisis, employment among nonnationals falls by 4 per cent.  Labour migration is a major transmission channel in Asia and the Pacific. Early evidence shows exceptionally sharp declines in migrant worker outflows to GCC countries and rising repatriations, while remittances are beginning to show signs of downward pressure.

 Introduction: Gathering clouds over global employment and the world of work This Employment and Social Trends May 2026 Update examines emerging risks to jobs, incomes and workers in a period of heightened global uncertainty. As in previous updates, it focuses on how changes in the geopolitical and economic environment can significantly affect labour markets and social outcomes. This Update gives particular attention to the potential impact of the Middle East crisis. The Middle East crisis is one of the major sources of downside risk for the world of work in 2026. Beyond its immediate human toll, the crisis has disrupted energy markets, transport routes, supply chains, tourism and investment confidence, with effects that extend well beyond the directly affected countries. These pressures are unfolding at a time when the global economy was already marked by weak growth prospects, elevated uncertainty and persistent decent work deficits. The world of work is one of the main channels through which these shocks affect people’s lives. When energy prices rise, transport costs increase, tourism weakens and supply chains are disrupted, workers and enterprises are affected through lower demand, higher operating costs, reduced working hours, pressure on real labour incomes and, in some cases, job losses. These effects are likely to be uneven, with greater risks for workers and enterprises in more exposed sectors and for those with limited protection. While this Update provides the ILO’s initial assessment of the labour market implications, it is not intended to

and, in some cases, job losses. These effects are likely to be uneven, with greater risks for workers and enterprises in more exposed sectors and for those with limited protection. While this Update provides the ILO’s initial assessment of the labour market implications, it is not intended to predict the future course of the crisis. Rather, it assesses the main transmission channels, estimates possible impacts where data allow, and highlights where risks to jobs, incomes and enterprises may be greatest. The analysis will be updated as the situation evolves and as more evidence becomes available. The report identifies the global impact with an additional focus on the Arab States and Asia and the Pacific. While the effects of the crisis are global, the most immediate impact is on these two regions. The Arab States are the most directly affected, through conflictrelated disruption, damage to economic activity, forced displacement, energy and trade shocks, and pressures on migrant workers. Asia and the Pacific is also highly exposed, as spillover effects are already visible through energy import dependence, transport and logistics disruptions, tourism, labour migration and remittance links with Gulf economies. The labour market impacts in the Islamic Republic of Iran are not explicitly assessed due to the lack of relevant data (including high frequency data) (see Box 1). The Update is organized in four parts. The first part provides a global overview, examining how the crisis is likely to affect labour markets through oil-price shocks and supply-chain exposure, with estimates for hours worked, real labour income and unemployment. The second part focuses on the Arab States, where labour market consequences are likely to be most immediate and direct. The third part focuses on Asia and the Pacific, where spillover effects are already visible and may intensify if disruption persists, while the final part provides a brief outline of the overall policy response and outlook.  I. Global overview: Impact beyond the conflict zone The crisis could further weaken an already fragile

where spillover effects are already visible and may intensify if disruption persists, while the final part provides a brief outline of the overall policy response and outlook.  I. Global overview: Impact beyond the conflict zone The crisis could further weaken an already fragile global economy. Even before the Middle East crisis,Employment and Social Trends: May 2026 Update 3 Growing labour market risks of the Middle East crisis

global growth was subdued, uncertainty was elevated, and many countries were facing constrained fiscal space and persistent inflationary pressures. The crisis has added a new layer of risk through higher energy prices, disrupted transport routes, supply-chain pressures and weaker investor confidence. Recent IMF scenario analysis points to a deterioration in the global outlook. Under its baseline assessment1, global GDP growth is revised down by around 0.3 percentage points, while inflation is revised up by approximately 0.5 points compared with pre-crisis projections. In a more severe scenario, which assumes more damage to energy infrastructure in the conflict region, the impact could be much larger, with global growth revised down by around 1.3 percentage points and inflation revised up by around 1.9 points. These scenarios underscore that the crisis is not only a regional shock, but also a potential source of wider macroeconomic instability. Assessing the global labour market impact is more complex. Direct effects, such as the destruction of workplaces, displacement of workers, disruption of enterprises and immediate income losses, are most visible in the Middle East. At the global level, the main concern is how the crisis spreads indirectly through energy prices, inflation, production costs, trade and investment. These transmission channels take time to work through the economy, which means that labour market impacts are likely to appear with a delay. These spillover effects can still be significant for enterprises and workers. Higher energy prices increase production and transport costs, reduce household purchasing power and put pressure on real wages and

economy, which means that labour market impacts are likely to appear with a delay. These spillover effects can still be significant for enterprises and workers. Higher energy prices increase production and transport costs, reduce household purchasing power and put pressure on real wages and weaken enterprise revenues, along with negatively impacting enterprise revenue. Weaker demand and heightened uncertainty can delay investment and hiring. Over time, these pressures can translate into reduced working hours, lower real labour incomes and, eventually, higher unemployment. The global analysis therefore focuses on the energyprice shock and its labour market transmission. It first

1 See IMF. 2026. World Economic Outlook, April 2026: Global Economy in the Shadow of War. 2 This is different from the persistence of the shock’s effects. The latter effects, spread over this year and next, are due to the strong lagged components. estimates possible impacts on three key indicators – hours worked, real labour income and unemployment – and then examines how exposure differs across regions, sectors and groups of workers. Impact on hours worked, income and unemployment Estimates based on econometric modelling of an oil shock trace how it affects labour markets over time. The current simulation assumes an oil price increase equivalent to approximately 50 per cent above the January–February 2026 average spread throughout March-May of this year.2 As oil prices have been highly volatile, the results should be read as a scenario-based estimate rather than a forecast.3 The labour market impact of an oil shock does not materialise all at once. The shock is transmitted through higher energy prices and lower oil supply, which raise production and transport costs, add to inflation and weaken activity across a broad range of sectors. As purchasing power declines and uncertainty rises, firms may postpone investment and households may reduce spending. Monetary policy tightening aimed at containing inflation can further reinforce these effects. As these pressures work through the economy, labour market impacts become more visible through lower working

purchasing power declines and uncertainty rises, firms may postpone investment and households may reduce spending. Monetary policy tightening aimed at containing inflation can further reinforce these effects. As these pressures work through the economy, labour market impacts become more visible through lower working hours, weaker real labour incomes and, eventually, higher unemployment. This time lag is reflected in the simulation results. Global hours worked and real labour incomes are estimated to decline gradually but significantly. Compared with a “no-conflict” scenario, which assumes that the oil shock does not occur, the simulation suggests that hours worked could be lower by approximately 0.5 per cent in 2026 and 1.1 per cent in 2027. This would be equivalent to a global loss of about 14 million full-time equivalent jobs in 2026, and 38 million in 2027, while real labour income could also decline by 1.1 per cent in 2026 and 3 per cent in 2027 (Figure 1), corresponding to losses 3 These estimates are subject to a high degree of uncertainty, reflecting the uncertain path of the conflict. The final size of the impact hinges strongly on the eventual size of the oil shock and its degree of persistence. See the Technical Note for further details on the duration and size of the oil shock used for the simulation.Employment and Social Trends: May 2026 Update 4 Growing labour market risks of the Middle East crisis

of around USD 1.1 trillion and USD 3 trillion, respectively, in 2021 PPP terms. Increases in the unemployment rate are expected to build more slowly, but could become significant in

2027. Before the crisis, the Employment and Social Trends 2026 (January 2026) projected the global unemployment rate to remain stable at 4.9 per cent in 2026 and to decline slightly in 2027. Under the oil-shock scenario, the unemployment rate would now rise by 0.1 percentage

2026 (January 2026) projected the global unemployment rate to remain stable at 4.9 per cent in 2026 and to decline slightly in 2027. Under the oil-shock scenario, the unemployment rate would now rise by 0.1 percentage points in 2026 and by 0.5 points in 2027 (Figure 1), equivalent to an additional 5 million unemployed people in 2026 and 20 million in 2027. Hence, if the crisis is not resolved and the shock proves as durable as historical experience of other oil shocks suggests, the resilience of the global labour market would be severely tested.  Figure 1. Simulated global labour market impacts, 2026 and 2027

Source: For further details on model and simulation, see

Technical Note.

Uneven exposure: regions, sectors and workers at higher risk The shock does not affect all countries, sectors, enterprises or workers in the same way. While the aggregate estimates show the possible scale and timing of

4 Less diversified economies that depend heavily on exposed sectors are likely to be more strongly affected. 5 Further details are provided in the Technical Note. 6 Exposure is established for each sector in every country individually as a function of its supply linkages with oil, gas and derived products facing disruptions due to the conflict, plus tourism-related exposure. Workers in sectors and countries the global labour market impact, exposure depends on how strongly economies and sectors rely on oil and gas, how deeply they are linked to energy-intensive supply chains, and where workers are concentrated.4 To identify worker exposure, the analysis looks at the dependence of countries and sectors on oil, gas and fertilizers in general, and from the Gulf specifically, both directly and through supply chains.5 In addition, workers in sectors that depend heavily on international tourism also face higher exposure due to more expensive and partially disrupted international flights. Exposure to supply disruptions is highest in regions most closely connected to Gulf energy flows and

and from the Gulf specifically, both directly and through supply chains.5 In addition, workers in sectors that depend heavily on international tourism also face higher exposure due to more expensive and partially disrupted international flights. Exposure to supply disruptions is highest in regions most closely connected to Gulf energy flows and energy-intensive supply chains. 6 At the regional level, the Arab States and Asia and the Pacific stand out. Around 40 per cent of employment in the Arab States and 22 per cent in Asia and the Pacific falls into the high-exposure category, with an additional 23 per cent and 62 per cent of employed facing medium exposure, respectively. This compares to around 15 per cent of global employment in the high-exposure category and 51 per cent facing medium exposure (Figure 2a). By contrast, high exposure is less prevalent in Africa, the Americas, and Europe and Central Asia. This does not mean that these regions are unaffected, but that their employment is less directly linked to the specific energy shock captured in this analysis. Transport services is the most exposed sector globally. Around 52 per cent of employment in transport services falls into the high-exposure category, reflecting the sector’s direct reliance on fuel and its central role in trade and mobility (Figure 2b). Manufacturing also shows significant exposure, with around 23 per cent of employment in high-exposure activities and another 56 per cent in medium exposure activities, also reflecting its reliance on energy and energy-intensive inputs. At least two-thirds of workers globally employed in agriculture, wholesale and retail trade, accommodation and food services face at least medium exposure profiles, while other services, including many public and social services, facing low exposure are unlikely to see their job being impacted through supply disruptions or rising input cost. Workers facing medium or high exposure have a higher risk of seeing some change in their employment due to supply channels. However, all workers could be impacted by inflation and second-round macroeconomic effects.

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through supply disruptions or rising input cost. Workers facing medium or high exposure have a higher risk of seeing some change in their employment due to supply channels. However, all workers could be impacted by inflation and second-round macroeconomic effects.

ours percenta e eal la our inco e percenta e ne plo ent rate percenta e pointsEmployment and Social Trends: May 2026 Update 5 Growing labour market risks of the Middle East crisis

are relatively less exposed. However, these global results mask substantial divergence between and within regions, as highlighted below. Some groups of workers are more exposed than others. Informal workers are overall more exposed than formal workers, reflecting their concentration in more energy-intensive sectors (Figure 2c). Lowand mediumskilled workers are more likely to be in higher exposure categories compared to high-skilled workers. At the same time, men tend to be in more exposed employment than women. These differences matter even more when higher exposure overlaps with lower income security, weaker access to social protection and other constraints to adjusting in response to such a shock. Figure 2. Distribution of employment by exposure to shock (percentage) a) By region

Source: Authors’ calculations ased on OECD and ADB inputoutput tables and ILO estimates; see Technical Note for further details.

b) By sector

Source: See Figure 2a.

c) By type of worker

Source: See Figure 2a.

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 Box 1. Effects of the crisis in Iran While it is not possible to carry out a full assessment of the impact on the Iranian labour market as noted above, data and assessments from other sources provide some insights into the situation in the country. Based on IMF estimates from April 20267, the real GDP of the Islamic Republic of Iran is expected to shrink by 6.1 per cent in 2026, reflecting the effects of disruption to transit of goods and infrastructure damage (a downward revision by 7.2 percentage points, relative to January 2026). At the same time, inflation estimates have been revised upwards by over 13 percentage points (reaching 68.9 per cent in 2026), which will further erode real wages and household incomes in the Islamic Republic of Iran. According to the UNDP8, human development is projected to have fallen by one and a half years in the Islamic Republic of Iran during the first month of conflict. Given the pre-crisis vulnerabilities, the conflict is creating further challenges for workers and businesses. In response, the Government has announced a series of short-term social protection measures, such as continuing the payment of social security benefits and services; expanding social assistance benefits (both cash and in-kind); and the introducing special credits for households and small firms.9

businesses. In response, the Government has announced a series of short-term social protection measures, such as continuing the payment of social security benefits and services; expanding social assistance benefits (both cash and in-kind); and the introducing special credits for households and small firms.9  II. The Arab States: Immediate and direct impact The Arab States region10 has been heavily affected by the ongoing crisis. Although a ceasefire took effect on 8 April 2026, uncertainty remains high, with continuing disruption around the Strait of Hormuz, restrictions on airspace and trade routes, and direct damage in several countries in the region. The crisis is affecting Gulf Cooperation Council (GCC)11 and non-GCC countries through different channels. In GCC countries, the main transmission channels include direct security risks, disruption to oil and gas exports, reduced transport and logistics activity, weaker tourism

7 IMF. 2026. April 2026 Regional Economic Outlook Update: Middle East and Central Asia 8 UNDP. 2026. Military Escalation in the Middle East: Reversals In Global Development, Policy Response Options, 13 April 2026. 9 Source: ILO Social Protection Monitor, available at, accessed on 14 May 2026. 10 he Ara States re ion follo s O’s definition and co prises countries na el : Bahrain raq Jordan Ku ait e anon Oman, Occupied Palestinian Territory, Qatar, Saudi Arabia, the Syrian Arab Republic, the United Arab Emirates and Yemen. 11 Gulf Cooperation Countries (GCC): Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates. Non-GCC countries in the Arab States grouping of the ILO: Iraq, Jordan, Lebanon, Syrian Arab Republic, Yemen and Occupied Palestinian Territory. 12 IMF. 2026. Regional Economic OutloUok Update: Middle East and Central Asia, April 2026. 13 UNDP. 2026. Military Escalation in the Middle East: Economic and Social Implications for the Arab States region Assessment. and business confidence, and delays in investment. In

12 IMF. 2026. Regional Economic OutloUok Update: Middle East and Central Asia, April 2026. 13 UNDP. 2026. Military Escalation in the Middle East: Economic and Social Implications for the Arab States region Assessment. and business confidence, and delays in investment. In non-GCC economies, the effects are generally more likely to be transmitted through higher fuel and food import costs, lower purchasing power, weaker demand from Gulf economies, pressure on remittances and tighter public finances. As an oil-producing country, Iraq is also affected by direct disruptions to oil export routes, similar to GCC producers. In some other countries, such as Lebanon, military activity remains a major concern, further exacerbating these challenges. The regional economic outlook has deteriorated sharply. The IMF projects real GDP growth in the GCC at around 2 per cent in 2026, about 2.3 percentage points lower than pre-war projections, reflecting direct disruptions in Gulf economies and wider spillover effects.12 UNDP estimates also suggest sizeable output losses, with GDP in some non-GCC economies projected to decline by between 5.2 and 8.7 per cent compared with a no-conflict scenario.13 While these estimates are not directly comparable and remain subject to uncertainty,Employment and Social Trends: May 2026 Update 7 Growing labour market risks of the Middle East crisis

they point in the same direction: slower growth, higher costs, weaker tourism and logistics activity, greater fiscal pressures, and increased uncertainty for enterprises and investors. These pressures are likely to translate quickly into labour market impacts. The following analysis examines how the crisis may affect hours worked and employment in the Arab States and which sectors and workers are most exposed. Impact on hours worked and employment: A scenario analysis To identify the region-specific effects, three scenarios are used to assess the labour market impact of the crisis in the Arab States 2026. The scenarios rely on a

in the Arab States and which sectors and workers are most exposed. Impact on hours worked and employment: A scenario analysis To identify the region-specific effects, three scenarios are used to assess the labour market impact of the crisis in the Arab States 2026. The scenarios rely on a crisis signal extracted from high-frequency Google Trends data using a small neural network. This approach has been developed specifically to assess the impact of the crisis in the Arab States region, as the oil-shock modelling approach used in the global and Asia Pacific exercises is not suitable for use in the region.14 The estimates show how hours worked and employment could decline under the three scenarios.15 The scenarios capture three possible crisis paths. Under rapid de-escalation, the initial shock fades relatively quickly and economic activity begins to normalize during the year. Under a protracted crisis, disruption remains elevated through 2026, affecting business activity, investment, mobility, trade and confidence. Under severe escalation, the crisis intensifies to a level of conflict well above the March 2026 situation, leading to deep and persistent disruption to economic activity. Even rapid de-escalation would leave a visible labour market impact. Using high-frequency data to capture early signs of disruption, the simulations suggest that total hours worked in the Arab States would decline by 1.3

14 The estimates are based on a region-specific empirical approach that uses high-frequency (monthly) Google Trends data and a neural network to detect abrupt economic disruption. In a second stage, the impact of the signal on hours worked and employment is estimated and used for the scenario projections. This approach differs from the macroeconomic modelling approach used for the global and Asia and the Pacific results, which focuses on the labour market effects of an oil price shock.

The reason is methodological: the crisis affects the Arab States in per cent and employment by 0.7 per cent in 2026, compared with a no-conflict scenario (Figure 3).

Under a protracted crisis, hours worked are projected

which focuses on the labour market effects of an oil price shock.

The reason is methodological: the crisis affects the Arab States in per cent and employment by 0.7 per cent in 2026, compared with a no-conflict scenario (Figure 3).

Under a protracted crisis, hours worked are projected to fall by 3.7 per cent and employment by 2.1 per cent; under escalation, the losses could reach 10.2 per cent and 5.9 per cent, respectively. Given continued uncertainty around energy flows, airspace restrictions, trade routes and security conditions, a protracted crisis – and even renewed escalation – remains a plausible risk. Projected impacts are larger on average in GCC countries than in the non-GCC countries covered by the analysis. his reflects the GCC’s ore direct e posure to disruptions in energy, transport, logistics, tourism and business confidence. In the simulation, hours worked could fall by 11.5 per cent in the GCC under the severe escalation scenario, compared with 7.7 per cent in nonGCC countries. Employment could decline by 7.1 per cent in the GCC and 4.4 per cent in non-GCC countries. The non-GCC aggregate figure excludes the Occupied Palestinian Territory and Lebanon, the latter being among the most severely affected non-GCC countries in the region. The scale of these losses is large by historical standards. During the COVID-19 crisis, hours worked in the Arab States fell by 4.4 per cent in 2020 compared to the prior year. The protracted crisis scenario would bring losses close to that scale, while the severe escalation scenario would imply a shock more than twice as large. Country-level simulations suggest that impacts could be higher in some highly exposed Gulf economies, especially those strongly linked to transport, logistics, tourism, trade and construction. Different economic structures, the degree of reliance on the Strait of Hormuz and the extent of physical damage sustained imply that effects will be uneven across countries. The pace of economic and

higher in some highly exposed Gulf economies, especially those strongly linked to transport, logistics, tourism, trade and construction. Different economic structures, the degree of reliance on the Strait of Hormuz and the extent of physica