Saudi expat workforce shrinks by 16,000 in first drop since 2024

Summary

• Foreign employment in Saudi Arabia fell by 16,000 in the quarter to June, government data showed.
• Construction job losses, state-firm layoffs and the Iran war drove the first decline in over two years.
• The reversal tests the kingdom's ability to staff megaprojects as budgets tighten and some schemes shrink.

The latest

Saudi Arabia's expatriate workforce contracted for the first time in more than two years, with foreigners employed in the kingdom — excluding domestic workers — down by 16,000 in the three months to June, according to the government's quarterly report. Construction drove the decline. Semafor Gulf reported that layoffs, the Iran war and a backlash against hiring foreigners at state-controlled companies all fed into the reversal.

Details

• The numbers: Foreign employment excluding domestic workers fell by 16,000 over the April-June quarter, according to the government's quarterly report. It is the first decline recorded in more than two years, reversing a stretch of expansion that accompanied the kingdom's construction and project-delivery push.
• The driver: Semafor Gulf reported the drop was led by a fall in construction jobs, the sector that has absorbed the largest share of foreign labor during the megaproject buildout. The report did not break down losses by nationality or by individual employer.
• Second indicator: Medical insurance policies for expatriates showed no growth at all across the first six months of 2026, according to Semafor Gulf — a separate signal that fewer foreigners are arriving in the kingdom, since coverage is tied to residency and employment status.
• State companies: Firms under state control have been trimming headcount or declining to renew contracts as budgets were cut for some projects, Semafor Gulf reported. The pullback is attributed in part to a backlash against hiring foreigners at those same state-controlled employers.
• NEOM factor: Some projects have been scaled back significantly, with NEOM named among them, according to Semafor Gulf. The report did not quantify how many positions the retrenchment at those projects removed from the labor market.
• Regional risk: The Iran war has dented the region's reputation for safety, Semafor Gulf reported, a factor weighing on the willingness of foreign workers to relocate. No figures were given for how many departures or cancelled arrivals are attributable to the conflict.
• Saudi nationals: The unemployment rate for Saudi citizens has not budged despite the contraction in foreign employment, according to the report. The economy is still generating new jobs, though at a slower pace than in preceding quarters.
• Forward signal: Purchasing Managers' Index data points to hiring bouncing back, Semafor Gulf reported, citing the survey's forward-looking components. The report did not specify a timeframe for the recovery or the level the index reached.

Background

Saudi Arabia's labor market has expanded steadily for years as Vision 2030 projects drew in foreign construction and services workers. Expatriates excluding domestic staff form a core part of that workforce, making quarterly swings in their numbers a close proxy for project activity.

Between the lines

Two of the pressures named are policy choices and one is not. Budget cuts, contract non-renewals and the backlash against foreign hiring at state firms are decisions Riyadh can reverse; the war's effect on the region's safety reputation is harder to manage. That the citizen unemployment rate held steady while foreign employment fell suggests the contraction landed on project labor rather than the domestic workforce.

What's next

The next quarterly government labor report will show whether the decline extends past June, and whether the PMI hiring rebound materializes in construction employment or stays confined to survey expectations.

Source: Semafor Gulf (Matthew Martin)