Thailand's labour outlook this year remains contradictory. While layoffs are expected to reach 500,000 due to a slowing manufacturing sector, with more factories closing than opening as business revenue declines, the Joint Standing Committee on Commerce, Industry and Banking is concerned about a shortage of foreign labour caused by hiring restrictions and allegations of corruption.

As layoffs become more widespread, the impact will be far-reaching, leading to declining personal incomes and household debt reaching precarious levels. Government relief measures such as the "Thai Help Thai Plus" programme may prove to be insufficient.

RED FLAGS

Kasikorn Research Center (K-Research) expects the Thai unemployment rate and factory closures to deteriorate further the rest of the year as the slowing economy and manufacturing sector continue to weigh on business activity and employment.

According to the think tank, the unemployment rate increased to 0.9% in the first quarter of 2026, consistent with a rise in workers applying for unemployment benefits under Section 33 of the Social Security Act.

Meanwhile, factory closures outnumbered new factory registrations in the first quarter this year, marking the first time in 10 quarters that more factories shut down than opened.

There are 12.2 million workers covered by Section 33, noted K-Research.

"Layoffs among workers covered by the Section 33 scheme rose at a 7% compound annual growth rate between 2022 and 2025. By the end of 2025, 531,779 workers had been laid off, a 20% increase from a year earlier," the think tank said in a research note.

According to the Federation of Thai Industries (FTI), lower capacity utilisation across key industries is raising red flags for further layoffs and rising unemployment, threatening to erode Thailand's competitiveness.

Pimjai Leeissaranukul, chairwoman of the FTI, said the industrial sector faces a serious problem as cheap foreign goods flood the market through e-commerce platforms, hampering domestic manufacturers.

Beyond consumer goods, the steel sector has been stung, with capacity utilisation plunging to 27-28%.

"Low capacity utilisation reflects reduced production and fewer workers employed, which directly affects industry employment," she said.

"This puts Thailand at risk based on both economic conditions and factory closures, driving unemployment higher."

CHEAP STEEL

The Commerce Ministry said 32 local steel companies shuttered operations in the first half of this year.

Thailand has been battered by surging imports of low-cost Chinese steel, especially wire rod products, according to Tata Steel (Thailand) Plc (TSTH), a subsidiary of India's largest steelmaker.

China's slowing economy, weighed down by a prolonged property crisis, has weakened domestic steel demand. As a result, Chinese producers have sharply increased exports, particularly to Southeast Asia, intensifying competition and pressuring Thai manufacturers.

Chinese steel exports hit a record 119 million tonnes in 2025, with shipments from January to May 2026 rising to 44.6 million tonnes, up from 41.2 million tonnes a year earlier, noted TSTH.

To address the flood of imports, Mrs Pimjai said the FTI proposed a "Made in Thailand" initiative to encourage the use of locally produced goods and safeguard employment.

The federation is urging the government to double its procurement budget for Thai products from 100 billion baht to 200 billion.

The measure would also require 40% local content for products. If successful, it could distribute up to 80 billion baht in income to small and medium-sized enterprises within the supply chain, she said.

INDUSTRY-WIDE IMPACT

Industries such as textiles, tobacco, apparel, furniture, leather, wood products, beverages, plastics, non-metallic minerals and auto parts are also struggling, with capacity utilisation of less than 60%.

"These are high-risk sectors that may see further layoffs and closures, though exact figures on shutdowns are not confirmed," said Panitarn Pavarolavidya, FTI secretary-general.

The automotive industry has also shown signs of weakness. Domestic sales of internal combustion engine (ICE) pickups fell by 4.7% to 70,141 units in the first half of this year, according to the FTI's Automotive Industry Club.

Strict lending criteria by banks, high household debt and surging oil prices have discouraged consumers from purchasing ICE vehicles, including pickups, said club spokesman Surapong Paisitpatanapong.

Meanwhile, textile and garment manufacturers have increasingly relocated production to neighbouring countries. However, some operations remain in Thailand due to the long and interconnected supply chain, Mr Panitarn said.

Another indicator of declining industrial employment is the growing number of working-age labourers shifting to food delivery services, reflected in an increase in motorcycle sales, noted Mrs Pimjai.

Thai businesses must adapt by enhancing competitiveness and upgrading technology, said Mr Panitarn.

"Entrepreneurs need to become more skilled and invest in new machinery to lift efficiency," he said.

According to K-Research, Thailand's rising industries, including electric vehicles (EVs), data centres and semiconductors, generally require fewer employees. As a consequence, as the country attracts these investments, these sectors cannot absorb the unemployed workers.

Manufacturing recorded the highest number of layoffs, accounting for 24% of the total, followed by the wholesale and retail sector (12%), construction (9%), professional services (5%) and logistics (4%).

Thai nationals made up more than 94% of the workers laid off, with migrant workers accounting for the remainder, coming from Myanmar, Cambodia and Laos.

K-Research anticipates layoffs among workers insured under Section 33 to average at least 40,000 a month in 2026.

"The trend will be driven by a sluggish economy, intensifying competition from overseas manufacturers, the economic fallout of the war in Iran, and the growing adoption of automation and other labour-replacing technologies," noted the think tank.

The number of migrant workers laid off this year has also increased because of the unsettled border dispute between Thailand and Cambodia, said K-Research.

INEVITABLE

Payong Srivanich, chairman of the Thai Bankers' Association, said the banking industry faces challenges in human resource management as artificial intelligence (AI) drives disruption.

Thailand's slower economic growth makes it more difficult for banks to maintain profitability, he said, while the Bank of Thailand's approach to standardising banking fees is likely to realign the sector's income structure.

This realignment would impact banks' fee income, prompting them to adjust their business models and income sources in line with the changing environment.

Moreover, banks need to invest in training their workforce while improving operational efficiency and productivity to control costs and maintain profitability, said Mr Payong.

Given the K-shaped recovery of the Thai economy, the manufacturing and services sectors are likely to face increasing labour market challenges, including worker shortages and replacement by automation and robots, he noted.

Both the public and private sectors should emphasise labour training and education reform, said Mr Payong.

"Vocational colleges and universities should work more closely with the private sector to produce graduates whose skills better match industry needs in a rapidly changing economic and labour market, both domestically and globally," he said.

In addition, Mr Payong proposed greater integration of databases across government agencies to generate deeper insights into labour market conditions across industries, identifying sectors with strong growth potential and pinpointing those facing risks.

Such data would enable policymakers to develop more targeted measures to address the country's labour market challenges.

The recovery is affecting different industries in various dimensions, especially the labour market, he noted.

As a result, headline economic indicators such as GDP growth, export growth and inflation do not fully reflect the underlying structural challenges in the Thail labour market.

MIGRANT WORKER SHORTAGE

Thailand's export and agricultural sectors are feeling the effects of the border conflict between Thailand and Cambodia, which has prompted many Cambodian workers to return to their home country.

Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said while many Cambodians in Thailand hold valid work permits, the sector is facing a significant labour shortage. Export operations, including for rice, have slowed due to a lack of stevedores.

Rice exporters have begun training workers from Myanmar to fill these gaps, though migrants from that nation generally prefer employment in restaurants, shops, housekeeping or factories over loading cargo, he said.

The border conflict continues to be a sensitive political issue for the government, noted Mr Chookiat. Reopening the country to Cambodian workers could potentially trigger a public backlash.

The government should consider recruiting migrant workers from other countries such as Bangladesh to help ease the labour shortage, he said.

Yotsaton Kijkuson, advisor to the Thai Garment Manufacturers Association, urged the government to address the labour shortage in this industry, which employs about 400,000 workers but requires around 40,000 more.

As Thailand becomes an aged society, he said fewer young Thai workers entered the industry in recent years.

To maintain the industry's competitiveness, the government should improve the efficiency of recruiting migrant labour through memorandums of understanding (MoUs) with neighbouring countries such as Myanmar and Laos, said Mr Yotsaton.

Migrant workers make up 20-30% of the sector's workforce, with most coming from Myanmar through an MoU agreement.

Recruiting migrant workers is challenging due to administrative processes, he noted.

"The shift towards an online-only registration system for migrant workers is problematic," said Mr Yotsaton.

"This system still requires physical verification and lacks sufficient support staff to assist employers with technical issues."

While the industry relies on migrants under MoUs, the number of workers arriving is often lower than requested.

In addition, many new arrivals lack the specific sewing skills required for garment production, he said.

Officials held talks about importing labour from other countries such as Sri Lanka, but Mr Yotsaton expressed concern about language barriers and the skills required for garment manufacturing compared with sectors such as construction.

INSUFFICIENT BUT MANAGEABLE

The hospitality sector employs 3.4-3.9 million people and has persistent labour shortages due to a high staff turnover rate of 25%.

The shortage is particularly severe during the peak season, said Thienprasit Chaiyapatranun, president of the Thai Hotels Association.

However, the situation remains manageable as hotel operators can hire casual workers during peak periods to meet demand, particularly at properties with banquet and meeting facilities that need to accommodate large numbers of guests.

"The labour shortage is not yet severe enough to affect business operations," he said.

"During the low season, some hotels that mainly employ permanent staff still have to bear salary costs and operating losses, which account for 10-15% of total operating expenses. They can regain profitability during the high season to offset losses incurred during slower periods of the year."

Men work on a Mitsubishi auto line in Chon Buri. K-Research predicts continued factory closures in Thailand. Somchai Poomlard

Additional reports by Kuakul Mornkum, Somhatai Mosika and Narumon Kasemsuk