High-Tech Unemployment Rises Amid Slowing Industry Growth

Israeli High-Tech Sector Faces Rising Unemployment in 2025

Israel’s high-tech sector, a conventional powerhouse of the nation’s economy, is experiencing a concerning surge in unemployment. The situation, described as “worrying” by the Employment Service, points too evolving challenges within the industry. Job stability, once a hallmark of this sector, appears to be weakening, demanding a closer look at the driving forces behind this shift.

Sharp Increase in High-Tech Job Seekers

The “Labor Market Pulse report for February 2025” reveals a meaningful uptick in unemployed high-tech professionals. Specifically, the number of individuals seeking roles in software development and application analysis has jumped by 12% in just two months, escalating from 6,250 in December to 7,000 in February. Similarly, database and network-related roles have seen a 9% increase, rising from 1,070 to 1,170 job seekers during the same period. This data highlights a distinct trend, sharply contrasted by a general decrease in overall job seekers across other sectors.

• Software development and application analysis job seekers: Increased by 12% (Dec-Feb)
• Database and network-related roles job seekers: Increased by 9% (Dec-Feb)
• High-tech job seekers’ share of all job seekers: Rose from 7.5% (early 2024) to 11.3% (February 2025)

Contrasting Trends in Overall Job Market

Ironically, this rise in high-tech unemployment coincides with a 2.2% decrease in the total number of job seekers in February, marking the lowest figure, 160,000, observed since the start of the recent conflict. Increases have been recorded across nearly all specific high-tech fields. This includes engineers (excluding electrical and electronics engineering, up 4.9%),engineers and technicians in the physical sciences and engineering (up 3.3%), and operations and IT engineers (up 0.8%).

• Overall job seekers decreased by 2.2% in February.
• Increases recorded across most high-tech sectors, including engineering and IT.

A Long-Term Shift, Not Just a Fluctuation

The Employment Service emphasizes that this is not merely a temporary fluctuation but an ongoing trend. The proportion of high-tech professionals among all job seekers has been steadily climbing for the past six years,nearly doubling from 6.3% in January 2019 to 11.3% in February 2025. This acceleration, especially noticeable since the third quarter of 2024, indicates a fundamental shift in the sector’s stability.As the report notes,”Whereas in 2022,the market strongly favored job seekers,this is no longer the case.”

Underlying Factors: Sector Expansion and More

While the overall expansion of the high-tech sector might partially explain the increase in unemployment, it’s not the sole cause. The sector’s growth within the labor market does generate a greater number of available positions; however, this aspect accounts for less than a third of the unemployment phenomenon. Data from the Central bureau of Statistics indicates that high-tech jobs constituted 8.6% of the labor market in January 2019,growing to approximately 10% today. This relatively small increase of 1.4 percentage points contrasts sharply with the five percentage point increase in high-tech job seekers, implying that other factors are at play. This trend suggests that junior or inexperienced workers may encounter greater difficulties entering the industry.

• High-tech jobs increased from 8.6% of the labor market (Jan 2019) to approximately 10% (present).
• Junior workers may face challenges entering the industry due to increased competition.

Expert Perspectives: Slowed Growth and Global Conditions

Dadi perlmutter, chairman of the committee to expand human capital in high-tech, offers a candid assessment: “The high-tech sector’s growth rate has slowed over the past two years, and in fact, the industry’s growth trajectory has flattened.” The numbers support this statement. While salaried jobs in high-tech reached 390,000 in 2022, they only grew to 397,000 in 2023 and 400,000 in 2024. this minimal growth, relative to the natural expansion of the labor market, suggests a sector in relative decline.

According to Perlmutter, “Demand for high-tech workers has slowed due to the war, artificial intelligence, and global economic conditions.The amount of investment in high-tech worldwide has dropped significantly over the past two years, and Israel is no exception.” He anticipates that the adaptation of companies to AI will eventually lead to new job creation in the medium term. However, it’s also crucial to acknowledge that investor concerns about judicial reform and democratic stability were impacting investment decisions prior to the war.

• Dadi Perlmutter: “The high-tech sector’s growth rate has slowed over the past two years, and actually, the industry’s growth trajectory has flattened.”
• “Demand for high-tech workers has slowed due to the war, artificial intelligence, and global economic conditions,” – Dadi Perlmutter

Unemployment Spreading to Strong Sectors

The Employment Service emphasizes that the rising unemployment in high-tech is part of a larger pattern: the weakening of traditionally robust professions. Over the past two months, 11 out of the 17 professional fields experiencing a rise in job seekers were considered “strong” sectors, including high-tech, engineering, medicine, and management. As a notable example, the number of doctors seeking employment has increased by 10% in the last two months, while unemployed senior managers have grown by 4.3%.

Socio-Economic Impact and Geographic Shifts

The increase in job seekers from high socio-economic backgrounds further underscores this trend. The share of job seekers from clusters 8–10 has risen by 3.5 percentage points over the past two years, from 16.3% to 19.8%. This is reflected geographically as well. In February, unemployment rates rose in wealthier cities, while most other cities experienced declines. Specifically, while northern cities like rosh Pina (-14%), Acre (-6.5%), and Nahariya (-6.3%) saw the largest decreases in job seekers, affluent areas such as Hod Hasharon (+3.8%), Kfar Saba (+2.2%), Tel aviv (+2%), and Ramat Hasharon (+1.7%) experienced increases.

Conclusion: Navigating a Changing Landscape

The analysis of recent data paints a clear picture: Israel’s high-tech sector is undergoing a significant transition marked by rising unemployment,shifting job market dynamics,and evolving economic pressures. While the situation presents challenges, it also offers opportunities for innovation, adaptation, and strategic workforce development. As the industry navigates these changes, professionals, policymakers, and stakeholders must collaborate to ensure a resilient and prosperous future for Israel’s high-tech economy. Stay informed and adapt your skills to remain competitive in this evolving landscape.

Given the rise in unemployment in IsraelS high-tech sector, what strategies can Israeli policymakers implement to mitigate the negative economic impacts and foster continued growth in the industry?

Interview: Understanding Rising Unemployment in Israel’s High-Tech Sector

We sat down with Dr. Aviva Cohen, a leading economist specializing in Israeli labor market trends, to discuss the recent surge in unemployment within Israel’s high-tech sector. Dr. Cohen shares her insights on the driving forces behind this shift and potential implications for the future.

The State of Israeli High-Tech Employment in 2025

Archyde: Dr. Cohen, thank you for joining us. The recent “Labor Market Pulse report for February 2025” highlights a concerning rise in high-tech unemployment. Can you paint a picture of the current situation?

Dr. Cohen: Certainly. We’re seeing a distinct increase in the number of high-tech professionals seeking employment. Specifically, roles in areas like software progress and database management have seen significant upticks in job seekers. For example, job seekers in Software development and application analysis increased by 12% between December and February. Simultaneously, and somewhat paradoxically, the overall number of job seekers across other sectors has decreased, highlighting a unique challenge for the high-tech industry.

Factors Contributing to High-Tech Unemployment

Archyde: What factors do you believe are contributing to this surge in high-tech unemployment? Is it simply a case of sector expansion outpacing job creation?

Dr. Cohen: While the high-tech sector has undoubtedly grown, its expansion alone doesn’t fully explain the unemployment trend. As the analysis notes, the increase in high-tech job seekers significantly outpaces the proportional growth of high-tech jobs within the overall labor market. Factors like slowed growth in the sector, as Dadi Perlmutter pointed out, combined with global economic conditions, the war, and the rise of artificial intelligence are impacting hiring decisions. There’s also increased competition, potentially making it more difficult for junior or less experienced workers to break into the industry.

The Impact of AI and Global Economic Conditions

Archyde: Artificial intelligence and global economic conditions were mentioned as contributing factors. Can you elaborate on how thes are impacting the Israeli high-tech sector?

Dr. Cohen: The global high-tech investment landscape has become more cautious,which naturally affects Israeli companies that rely on foreign funding.Regarding AI, while it eventually will lead to new job creation, the initial adaptation phase can lead to a restructuring of roles and skill requirements, creating temporary displacement. Companies are reassessing their needs, leading to a slowdown in hiring for certain conventional roles.

A Long-Term Trend or Temporary Fluctuation?

Archyde: The Employment Service emphasizes this is a long-term trend, not just a temporary fluctuation. Do you agree, and what are the long-term implications for the Israeli economy?

Dr. Cohen: I concur that this appears to be an ongoing shift. This rise in high-tech job seekers over the past several years validates this. The implications are significant.High-tech has been a major driver of economic growth in Israel. A sustained period of increased unemployment could dampen innovation, reduce tax revenue, and potentially trigger a broader economic slowdown. The sector’s growth rate has slowed over the past two years, and actually, the industry’s growth trajectory has flattened.

Socio-Economic and Geographic Shifts in Unemployment

Archyde: The report also mentions shifts in the socio-economic backgrounds and geographic locations of job seekers. Are wealthier areas and individuals more affected by this high-tech unemployment?

Dr. Cohen: Interestingly, yes. We’re seeing a rise in job seekers from higher socio-economic clusters and an increase in unemployment in typically affluent cities. This could indicate that layoffs are impacting more established professionals, or that those from wealthier backgrounds have the resources to actively seek new employment making the employment more visible in the short term.

Adapting to the Changing Landscape: Advice for Professionals

Archyde: What advice would you give to high-tech professionals in Israel navigating this changing landscape?

Dr. Cohen: adaptability is key. Continuously upskill, especially in areas related to AI and cloud computing, it is very important. Focus on the industry trends. Networking and maintaining strong connections within the industry are also crucial.Also consider opportunities outside the traditional high-tech hubs.

A Question for Our Readers

Archyde: a thought-provoking question for our readers: How can Israel ensure its high-tech sector remains a vibrant engine of economic growth in the face of these challenges? Share your thoughts and solutions in the comments below!