Declining Production Delivers Severe Blow to Jobs in Wholesale and Retail Industry

Kenya’s wholesale and retail trade — one of the country’s most critical employment engines — is facing a severe labor market strain as weakening domestic output continues to ripple through supply chains. Fresh analysis from the Kenya Institute for Public Policy Research and Analysis (KIPPRA) shows that slowing production in agriculture and manufacturing is undermining hiring momentum, compressing business margins, and reshaping the structure of employment across the sector.

Declining production impact jobs wholesale retail industry as supply chains weaken

The wholesale and retail industry plays a central role in Kenya’s economy, accounting for a substantial share of total employment and serving as a distribution bridge between producers and consumers. However, reduced agricultural yields and sluggish manufacturing performance have constrained the availability of locally produced goods, forcing traders to rely increasingly on imports.

This structural shift has come at a cost. Imported goods expose wholesalers and retailers to foreign exchange volatility, higher tariffs, and elevated logistics expenses. For small and medium-sized enterprises operating on thin profit margins, these pressures translate into limited capacity to expand operations or recruit additional staff.

Although official figures show marginal increases in total employment within the sector in recent years, analysts caution that the pace of job growth has slowed significantly compared to pre-pandemic trends. More critically, the share of formal employment remains subdued, with informal work continuing to dominate retail activities.

Data from the Kenya National Bureau of Statistics indicates that the sector’s contribution to GDP has edged downward in recent years, reflecting broader economic headwinds. As purchasing power weakens due to inflation and rising living costs, consumer demand softens — further reducing turnover for retail businesses and dampening hiring prospects.

“Declining domestic production creates a multiplier effect across trade,” says Nairobi-based economist Peter Mwangi. “When supply shrinks and import costs rise, wholesalers cut expansion plans, retailers trim staff growth, and informalization increases. The long-term risk is stagnation in quality job creation.”

Structural risks deepen as policy response lags

The declining production impact jobs wholesale retail industry not only through reduced hiring but also through job quality deterioration. Informal employment — estimated to account for roughly four-fifths of the sector’s workforce — offers flexibility but limited social protection and wage stability. As formal job creation slows, more workers are absorbed into precarious trading activities with limited upward mobility.

Industry stakeholders argue that policy bottlenecks are compounding the challenge. High energy costs, limited access to affordable credit, regulatory burdens, and supply chain inefficiencies continue to weigh heavily on manufacturers and agricultural producers — the very sectors that supply wholesale and retail businesses.

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Without targeted interventions to revive domestic production capacity, the trade ecosystem risks further erosion. Analysts suggest that strengthening local value chains, reducing compliance costs for SMEs, and improving infrastructure could help restore supply stability and reignite employment growth.

From a macroeconomic perspective, the wholesale and retail industry acts as a transmission channel for broader economic performance. When production slows upstream, employment growth weakens downstream. The current trajectory signals vulnerability at a time when Kenya’s labor market needs resilient job creation to absorb a growing workforce.

While overall employment figures nationally may show incremental growth, the structural slowdown within wholesale and retail raises concerns about sustainability. Unless agriculture and manufacturing regain momentum, the sector’s ability to serve as a dependable employment anchor may continue to diminish.