Switzerland’s Unemployment Paradox: Why a Wealthy Export Nation Is Losing Ground to Its European Peers

For decades, Switzerland has worn its low unemployment rate as a badge of economic honour — a symbol of the country’s enviable combination of skilled labour, industrial precision, and political neutrality. That image is now quietly fraying. The country’s unemployment rate has risen for the second consecutive year, and the forces driving it upward — a strong Swiss franc, US trade frictions, pharmaceutical sector restructuring, and the still-unfolding aftermath of the Credit Suisse-UBS merger — are not short-term noise. They are structural signals of a labour market in the midst of a genuine recalibration.

According to the Swiss Labour Force Survey conducted by the Federal Statistical Office, the unemployment rate as defined by the International Labour Organisation (ILO) rose from 4.7% in the third quarter of 2024 to 5.1% in the third quarter of 2025 — an increase of 0.4 percentage points. In the fourth quarter of 2025, the ILO rate stood at 5.0%, with the broader SECO-measured rate — based on registrations at regional employment offices — reaching 2.9% in November 2025, its highest since March of that year. These two measures track different dimensions of the same labour market, and taken together, they tell a story of mounting pressure.

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The rise sets Switzerland apart, in a notable way, from most of its European neighbours. While Germany saw its ILO unemployment rate increase by 0.3 percentage points over the same period, and France and Austria each moved up by 0.2 points, Italy held steady at 5.6% and the EU’s 27-country average remained stable at around 5.7%. Switzerland’s labour market, in other words, is moving in the opposite direction from the EU average at a time when most of the bloc has achieved a degree of stabilisation.

“Switzerland is heavily dependent on exports, so the global economic situation may have a stronger impact than in EU countries whose economies are less dependent on trade with the rest of the world,” says Giovanni Ferro-Luzzi, professor of economics at the University of Geneva and the Geneva School of Business Administration. His observation cuts to the heart of Switzerland’s particular vulnerability: what makes the country prosperous in calm periods — deep integration into global trade, a highly mobile labour force, and heavy exposure to high-value cyclical sectors — is precisely what makes it sensitive when the global environment turns hostile.

The Export Trap: US Tariffs and the Strong Swiss Franc

No single factor explains the rise in Swiss unemployment more cleanly than the country’s unusual degree of trade dependence. Switzerland is the world’s most trade-exposed advanced economy in per capita terms, with exports of goods and services accounting for a dominant share of GDP. When the United States imposed additional tariffs of 39% on Swiss imports in August 2025 — subsequently reduced to 15%, but leaving Swiss exporters at a competitive disadvantage relative to EU peers facing even lower US tariff rates — the impact on order books was rapid and visible.

The State Secretariat for Economic Affairs (SECO) had already been tracking the slowdown. Switzerland’s GDP contracted in the third quarter of 2025, primarily due to a downturn in the chemical and pharmaceutical industry, and while a recovery in the final quarter provided some relief, the full-year growth figure remained muted. SECO’s Federal Expert Group on Business Cycles has revised its 2026 GDP forecast (adjusted for sporting events) upward to 1.1% from a previous estimate of 0.9% — a modest improvement attributable largely to the partial tariff reduction — but cautioned that uncertainty remains high. Unemployment is forecast to average 3.1% on the SECO measure in 2026, while the ILO measure is expected to approach 5%, according to KOF Swiss Economic Institute at ETH Zurich.

Compounding the tariff challenge is the chronic appreciation of the Swiss franc. By late January 2026, the franc had reached its strongest level in years against the US dollar, tightening the squeeze on Swiss exporters who must sell in foreign currencies but pay wages and operating costs in a currency that keeps rising. “A strong Swiss franc creates significant pressure on the metalworking and mechanical engineering sectors, as well as on the watchmaking industry,” says Daniel Kopp, central secretary of the Swiss Trade Union Federation. The Deloitte Swiss Watch Industry Study 2025, based on surveys of 111 senior industry executives, identified continued franc strength as the top risk identified by industry executives for the coming 12 months, ahead of even weakening global demand.

The numbers bear out those concerns. Total Swiss watch exports fell 1.7% in value to CHF 25.6 billion for full-year 2025, with unit volume declining 4.8% to 14.6 million pieces. Federation of the Swiss Watch Industry president Yves Bugmann described 2025 as “a year of significant uncertainty and increasingly demanding market conditions,” pointing to the convergence of US trade policy disruptions, a collapse of more than a third in Chinese market demand over two years, surging gold prices, and a persistently strong franc. Employment in the watchmaking sector fell by 1.3% during the year. In the metalworking and mechanical engineering industries, the franc’s appreciation is similarly squeezing margins, and companies have increasingly turned to partial unemployment schemes — in which workers shift to shorter hours with state-supported compensation — to manage costs without triggering full redundancies.

The Pharmaceutical Sector: From Stabiliser to Shock Absorber

For most of the past decade, Switzerland’s pharmaceutical and life sciences industry served as a ballast for the broader labour market — a high-value, relatively recession-resistant sector dominated by global heavyweights including Novartis, Roche, and Pfizer’s Swiss operations that reliably absorbed skilled workers even during downturns elsewhere. That dynamic has shifted.

In 2025, the pharmaceutical sector became the single largest source of redundancies in Switzerland, accounting for approximately 30% of total layoffs according to the Labour Market Barometer published in January 2026 by employment specialist von Rundstedt Switzerland. The Barometer, based on data from 2,668 people affected by redundancies and 415 companies across sectors, described 2025 as a year of restrained growth, elevated global uncertainty, and sustained pressure from US tariff policies — with the pharmaceutical industry and services sector showing relative resilience even as other segments contracted.

The individual corporate actions tell the story in concrete terms. Novartis announced plans to cut up to 550 jobs at its Stein, Switzerland facility by the end of 2027, phasing out tablet and capsule production as it pivots to RNA therapies and advanced biologics. Separately, the company laid off 427 US-based staff and is investing $23 billion in US manufacturing infrastructure over five years — a strategic reorientation toward the American market that carries direct implications for its Swiss employment base. Pfizer, meanwhile, reduced its Swiss workforce from approximately 300 employees to 70 by the end of 2025, part of a global cost-saving programme targeting $7.7 billion in savings through 2027.

The structural dimension of these cuts is what concerns economists most. “The reasons are largely cyclical, although long-term structural changes cannot be ruled out if the US administration continues to intensify pressure on this sector in the coming years,” says Ferro-Luzzi. The US push to relocate pharmaceutical manufacturing domestically — accelerated by both the Biden and Trump administrations’ industrial policy priorities — puts direct pressure on Swiss production facilities that have historically served as the manufacturing backbone of global pharma supply chains. If that trend continues, the 30% share of Swiss redundancies now attributable to pharma and life sciences may prove to be a floor rather than a ceiling.

Globally, biopharma layoffs rose 16% year-over-year in 2025, affecting approximately 42,700 employees — a 47% increase from 2024. Switzerland’s exposure to that global restructuring is proportionally larger than most countries, given the density of multinational pharma presence in the Basel and Zurich corridors.

Banking in Transition: The Long Shadow of Credit Suisse

The financial sector adds a third layer to Switzerland’s employment challenge, one that has been building since the emergency government-brokered takeover of Credit Suisse by UBS in March 2023. The merger, which created an overnight banking entity with a workforce of just under 120,000 employees globally, set in motion a multi-year restructuring that has been progressively reshaping Switzerland’s financial labour market.

By mid-2025, UBS had reduced its global headcount by approximately 15,000 from the post-merger peak — still below an internal target of 35,000 reductions according to Bloomberg — with headcount standing at approximately 105,000 as of June 2025. The integration has proceeded more slowly than initially anticipated: with only approximately 1,300 job cuts per quarter since early 2024, and an attrition rate that fell below historic norms, UBS shifted its emphasis from meeting absolute headcount targets to achieving its $13 billion cost-saving goal, which was approximately 70% complete by mid-2025. The bank is now expected to cut a further 10,000 jobs by 2027, according to the Swiss newspaper SonntagsBlick, with many reductions planned through natural attrition and early retirement. Client migration from legacy Credit Suisse systems is not expected to complete until around the end of March 2026, after which a fresh wave of rationalisation is anticipated.

The direct job losses are one part of the picture. Equally significant is the broader signal the merger sends to Switzerland’s financial ecosystem. The country’s financial sector — banking, insurance, asset management, and related services — contributes approximately 8.9% of GDP, and its weight in the labour market means that restructuring at major institutions ripples across adjacent sectors including legal services, technology, and real estate. Unemployment in financial services has risen in parallel with ongoing restructuring announcements across multiple banks and insurance companies, even as UBS itself reports healthy profits: the bank posted a net profit of $2.4 billion in Q3 2025, a 74% year-on-year increase. Profitability and headcount expansion are not the same thing in the post-merger integration era.

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Long-Term Unemployment and a Vanishing Job Market

Behind the headline rates lies a deeper trend: the return of long-term unemployment as a structural feature of the Swiss labour market. In 2023, as Switzerland emerged from the economic disruption of the Covid-19 pandemic, approximately 70,000 people were classified as long-term unemployed under the ILO definition — jobless for 12 months or more — down from nearly 110,000 two years earlier. By 2025, that number had climbed back above 84,000. Although the share of long-term unemployed in total joblessness has actually fallen slightly — from 33% to 32.1% — the absolute number of people facing extended exclusion from the labour market continues to rise.

“This is a problem because it is well known that prolonged absence from work makes returning to the labour market harder,” says Ferro-Luzzi. “Motivation gives way to discouragement among the unemployed, and employers see the length of unemployment — very often wrongly — as a sign that the person is less attractive as a candidate.” The median duration of unemployment fell slightly from 213 to 192 days in Q3 2025, which offers some comfort, but the aggregate stock of long-term unemployed points to a labour market that is becoming less fluid.

Simultaneously, the supply of job opportunities has shrunk significantly. In 2022, Switzerland faced a record labour shortage with nearly 130,000 job vacancies listed across the economy. By 2025, that figure had fallen to below 90,000 — a 30% decline driven primarily by worsening economic conditions, elevated uncertainty, and a pullback in hiring plans across export-facing industries. Pascal Scheiwiller, CEO of Alixio Group and von Rundstedt Switzerland, noted in the Labour Market Barometer that “the labour market remains capable of absorbing workforce transitions, even if younger jobseekers require more time to find employment and pressure on older workers persists.”

Demographic pressures compound the cyclical challenges. With an aging population, Switzerland faces an inexorable increase in health care and public service demand even as its working-age population slowly contracts. Stefan Gaini, head of communications at the Swiss Employers’ Association, notes that future labour shortages are expected to be most acute in healthcare, construction, and hospitality — sectors that are difficult to offshore and resistant to automation.

Artificial Intelligence: Gradual Change, Not Mass Displacement

Inevitably, any discussion of rising unemployment in an advanced economy in 2026 invites the question of artificial intelligence. Switzerland is no exception. Yet the experts interviewed are notably measured in their assessment of AI’s role in the current labour market deterioration.

“AI primarily changes the way we work,” says Françoise Tshants, SECO spokesperson. “In Switzerland, for example, over the last two decades digitisation has led to growth of activities not subject to automation, while automated tasks have lost significance. However, these changes happened gradually, and overall employment continued to rise.” The pattern she describes — in which technology shifts the composition of work rather than eliminating it in aggregate — is consistent with the historical Swiss experience of managing industrial transitions without catastrophic labour market disruption.

Daniel Kopp of the Swiss Trade Union Federation is similarly cautious. “We do not think AI will lead to mass unemployment.” That said, sectors particularly associated with AI adoption — information technology, banking, administrative services — are already showing early signs of rising unemployment, as AI tools reduce the need for entry-level analytical and clerical roles. Unions are watching these trends carefully, though they characterise AI as a secondary factor in the current deterioration rather than a primary cause. The primary causes, in their assessment, are macroeconomic and sectoral: trade policy uncertainty, currency pressure, pharma restructuring, and the UBS-Credit Suisse integration.

Outlook: Modest Recovery, Persistent Pressure

The SECO forecast published in December 2025 offers a cautiously optimistic picture for 2026: GDP growth of 1.1% (adjusted for sporting events), supported by solid private consumption, low inflation at 0.2%, and a gradual recovery in goods exports. The reduction in US tariffs from 39% to 15% has meaningfully improved prospects for affected sectors. But the forecast also projects the SECO unemployment rate rising to an average of 3.1% in 2026, up from 2.9% in 2025, with the ILO measure expected by KOF to approach 5% — suggesting the labour market will continue to feel the weight of 2025’s multiple shocks well into the coming year.

For workers in pharma, watchmaking, metalworking, and banking, that means navigating a job market that is tightening on multiple fronts simultaneously: fewer open positions, longer search durations, and structural shifts that are not easily reversed by a quarter or two of modest GDP growth. Switzerland’s labour market has historically been one of its most powerful competitive advantages. Whether it can absorb the convergence of external shocks and internal restructuring without leaving a lasting mark on long-term employment capacity is the defining economic question of the country’s near-term future.

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By: Montel Kamau

Serrari Financial Analyst

26th February, 2026