The war is creating a labor shortage, and a generation of delayed careers
Israel has 148,000 job vacancies even though its employment rate remains below its prewar level. Extended reserve duty is already expected to reduce the future earnings of thousands of workers, while young Israelis are entering the workforce later.
The employment data published in recent days by the Central Bureau of Statistics (CBS) and the Employment Service suggest that between one round of fighting and the next, Israel is repeatedly returning to a wartime routine rather than to the economic reality that existed before October 7, 2023. From the government's perspective, this may be tolerable, but it is a damaging new normal: It constrains economic growth, delays young people's entry into the labor market and risks inflicting long-term damage on both workers and the economy.
The employment rate, excluding people on unpaid leave, rose from 60.1% in June to 60.3% in July. At the height of Operation Roaring Lion in March, it had fallen to 51.9%. The recovery therefore represents a return to the wartime range of roughly 60%-61%, but not to the levels above 61% recorded before October 7.
The employment rate, rather than the unemployment rate, is the more useful indicator of how much of the population is actually participating in the economy. Its failure to return to prewar levels reflects, among other factors, the continued mobilization of reservists and the prolonged crisis in tourism.
The wartime routine is also reflected in the number of job vacancies, which rose from 146,800 in June to 148,000 in July, an increase of 1.5% based on trend data. This continues the upward trend that began after Operation Roaring Lion. In June, the number of vacancies increased by 5.1%.
In December 2025, the number of vacancies reached an all-time high of 153,200, exceeding even the peak recorded during the post-pandemic recovery, when vacancies reached about 151,000 in August and September 2022. But in March, at the height of the war, the number fell to a relative low of about 125,000.
The reasons for the high number of vacancies are different from those during the pandemic. During COVID-19, the surge largely reflected a mismatch between workers' skills and locations and the jobs available. During the war, it is reasonable to assume that the shortage of workers is being driven partly by extensive reserve duty, which affects reservists and their spouses, as well as the departure of young Israelis abroad and restrictions on the entry of Palestinian workers.
The recurring rise in vacancies highlights the continuing difficulty of filling positions that typically employ young people, as well as lower-wage jobs that do not require academic training. There are more than 14,000 vacancies for waiters, bartenders and cooks, about 8,700 vacancies in construction and 5,400 vacancies for drivers, a 10% increase in just two months.
According to the Employment Service, the ratio of vacancies to job seekers stood at about 0.81 in May, meaning there were roughly four vacancies for every five job seekers. That points to a relatively tight labor market, with employers continuing to struggle to find workers even as some segments of the economy remain weak.
One of the most significant implications of these figures is the delayed entry of young people into the workforce and the disruption of career trajectories for others.
A study by the Taub Center published about two weeks ago warned that the average reservist, who has served more than 200 days, could suffer an estimated 5% reduction in salary over a period of five to 20 years. Fathers who served for particularly long periods, between 290 and 320 days, a group numbering more than 100,000 people, could face a salary reduction of at least 6%.
Many thousands of reservists have been absent from their jobs for a year or more cumulatively. Beyond the immediate loss of income, this means lost professional experience, missed promotion opportunities and delayed career development. Over the long term, the resulting effect on wages could be even larger, potentially reaching 7% or more.
This creates a paradox in the Israeli labor market. The country can simultaneously have a relatively high number of job vacancies and a significant group of people whose participation in the labor force remains below its prewar level. The problem is therefore not simply a lack of jobs. It is a growing mismatch between the workers available, the workers employers need and the ability of large parts of the population to participate consistently in the economy.
If there is one sector in which it remains particularly difficult to isolate the effects of the war, it is high-tech.
According to Employment Service data, the number of job seekers who are programmers and application analysts increased by 9% over the past two months, from 7,950 in May to 8,650 in July. By comparison, the number of job seekers across high-tech as a whole increased by only 3%, meaning that unemployment in other high-tech professions actually declined.
This makes it difficult to attribute the sector's weakness directly to the war. Two of the major forces reshaping Israeli high-tech, the decline in the dollar's exchange rate and the rapid adoption of AI, are largely independent of the conflict. The strong shekel is putting pressure on companies whose revenues are largely denominated in dollars while their costs, particularly salaries, are in shekels. At the same time, AI is changing the demand for certain types of technology workers and increasing productivity in others.
The defense industry is also absorbing some of the workers being displaced by the broader high-tech slowdown, making the overall employment picture look healthier than it otherwise might.
The result is an economy that has become increasingly adept at functioning through repeated rounds of war, but that has not returned to its prewar labor-market equilibrium. Employment recovers, vacancies rebound and businesses reopen, but the recovery repeatedly stops short of restoring the level of economic participation that existed before October 7.
That may be manageable in the short term. The longer the pattern continues, however, the greater the risk that what began as a temporary wartime distortion becomes a structural feature of the Israeli economy, with young people entering the workforce later, reservists falling behind in their careers, employers struggling to fill essential jobs and productivity suffering as a result.
