The demand for workers in 2025 rose sharply, bringing the adjusted unemployment rate for this year down to approximately 3.5%, and 3.2% without the deviation of the Twelve-Day War – a historically low level. This is according to the Ministry of Labor's 2025 labor market report.
According to the report, the employment rate stood at around 60.3% – only slightly lower than its level prior to the Israel-Hamas war, when it stood at approximately 61%. The gap is attributed by the report's authors in the Ministry's Senior Division for Strategy and Policy Planning primarily to a "decline in the employment rate of young people (ages 25–40) and a decline in employment in northern localities."
In connection to northern residents, the report concludes that the war "severely affected employment in evacuated localities, and particularly in confrontation-line localities in the North that have not yet recovered. The employment rate there stands at only 74%, compared to 77.6% before the war. Those who suffered the most severe blow are northern men, whose employment rate dropped from 79% before the war to 64% in the second half of 2025."
In addition, the report shows that the quality and nature of employment in growth-engine localities experienced a blow attributed to sector concentration and high dependence on manufacturing sectors (industry, construction, agriculture), which "apparently face greater difficulty in employing workers during a time of crisis."
Looking broadly at the entire economy, however, the data show that throughout 2025, high demands for workers were experienced, leaving the job vacancy rate at a high level of 4.6%, which translates to approximately 152,000 jobs, reflecting primarily the difficulty in filling positions in most sectors of the economy, and especially in the construction, hospitality, and commerce sectors.
Alongside this, despite the high demands for workers, real wages in the economy rose by only about 0.3%, mainly due to a decline in wages in the public sector of about 1.6%, the bulk of demand coming from low-wage sectors, and restraint in the high-tech sector.
In connection to these matters, the Ministry of Labor notes that: "Increasing the quotas for foreign workers, whose number stood at approximately 230,000 at the end of the fourth quarter of 2025, brought relief to the shortage among construction workers, and is expected to ease the difficulty in finding workers in additional fields to which the foreign worker quota has already been expanded."
The Ministry also notes, however, that: "The entry of foreign workers raises concerns about the reduction of employment opportunities for local workers, the creation of a high dependence of the economy on external workers, especially during emergencies, and damage to the wages and productivity of Israeli workers, primarily those with low education."
The number of employed persons in the Israeli high-tech sector expanded once again, rising by approximately 2.3%, thereby bringing the number of workers in the industry to about 405,000. The recovery, according to the report, relies on "technological employees," whose rate rose by about 4%, while peripheral professions such as marketing and administration continued to shrink.
"This development points to the strengthening of a long-term trend of change in the employment structure in the sector toward the core of technology at the expense of peripheral roles such as administration and marketing," write the report's authors, while simultaneously noting the number of technological employees in the rest of the economic sectors – a trend hinting at the spillover of human capital back into the high-tech sector with the start of its recovery.
The report also points to a "turnaround in the software developer market," where for the first time in a decade, the supply-to-demand ratio among software developers, who constitute nearly a quarter of technological occupation holders, crossed the 1.0 threshold, indicating a shift from a structural shortage to a surplus of job seekers.
Contrary to the conclusion reached among readers of the Employment Service report (which is subordinate to the Ministry of Economy) with whom Walla Money spoke, the Ministry of Labor's report notes that: The impact of AI is in shifting worker demands toward the worlds of data and AI, and demands for these workers rose by a rate of 50%.
In addition, the Ministry notes that: "It appears that the growing use of generative artificial intelligence may continue to increase the demand for workers with occupations in the technological field, but also necessitate the adaptation of workers' knowledge to changing market demands. That is, the central challenge for technological occupation holders is acquiring new knowledge in their profession, and not necessarily coping with a high risk of employment loss."
In this context, it is further noted in the report that it appears that: "The difficulties experienced by job seekers in traditional development fields do not remain within the boundaries of employment alone. These developments are already trickling into the post-secondary education system, reducing the incentive of potential students to study computer science. As a result, a decline was recorded in the number of new students for computing majors in academia and at MAHAT (the Government Institute for Training in Technology and Science). In contrast, the number of graduate students in computer science maintained stable growth during these years, which aligns with an emerging rise in demand for highly skilled personnel in high-tech."
"Lower than it was a decade ago"
The Ministry of Labor's examination of all components of Israel's working-age population presents a "complex picture," particularly among Haredi men, whose employment rate stood in 2025 at 53% – almost unchanged compared to 53.1% in 2022, and a rise of only about 1% compared to 52% in 2015. Meaning: Stagnation over an entire decade.
"This figure sparks pessimism regarding compliance with the government target of 65% for the year 2030," the report states, while: "Part of the stagnation is affected by a low rate of young Haredi men in the labor market. The employment rate in this group did not rise throughout the entire decade, and at the end of 2025 stood at only 47.3%, lower than the employment rate in all population groups, men and women alike, and lower than it was a decade ago."
Robi Shemesh, director-general of the Ministry of Labor: "The report's findings indicate that the Israeli labor market maintained relative stability in 2025 as well, despite the complex security reality. Alongside low unemployment rates and high demand for workers, we identify significant changes in the structure of the labor market, including the impact of artificial intelligence, changes in the high-tech sector, and the expansion of the employment of foreign workers. Our challenge is to adapt the level of knowledge and skills of workers to a rapidly changing world, all of which we can do through investment in human capital and raising labor productivity."