[RÉUNION] Unemployment Hits 19% in Q2 2026: Shrinking Public Sector Weighs on Recovery

Unemployment in Réunion hit 19% in Q2 2026, up 3 points year on year. The public sector shed 1,000 jobs while business failures surged 18%. The private sector is holding, but the gap with the mainland is widening.

La Réunion — Business.OI
Photo : Zainal Lakembe / Pexels

Unemployment in Réunion reached 19% of the active population in the second quarter of 2026 — three points higher than a year ago, according to INSEE. A shrinking public sector and rising business failures are casting a shadow over the year-end outlook.

Public Sector Pulls Back

The sharpest job losses this quarter came from the public sector, which fell 0.9% over three months and 1.1% year on year — around 1,000 positions eliminated. Non-market services, employing 127,600 people, shed 0.7% of their workforce. Construction declined a further 0.4% after a slight recovery in late 2025, while business services dropped 0.6%, losing roughly 200 jobs.

Private Sector Holds Its Own

Against this backdrop, private-sector employment held steady, edging up 0.1% year on year. Two sectors stand out: information and communication (+4.3%, around 200 new jobs) and retail trade excluding temporary work (+0.6%, approximately 200 jobs). Hotels and restaurants were flat over the quarter but up 0.9% year on year, supported by a 6% rise in hotel occupancy rates.

Business Failures Rising Four Times Faster than National Rate

Between July 2025 and June 2026, 1,240 businesses in Réunion filed for insolvency — 190 more than the previous year (+18%), compared with just +5% nationally. Meanwhile, only 3,960 new businesses were created in Q2, a 5% quarterly decline, pointing to a pause in entrepreneurial momentum.

A Widening Gap with Metropolitan France

Despite the employment challenges, hours worked actually grew 0.4% year on year in Réunion, compared with -0.7% on the mainland. Inflation came in slightly lower at 1.5% in June 2026, versus 1.8% nationally. Total salaried employment stood at 293,900 at end of June, down 0.2% on the quarter.

Why It Matters

With unemployment at 19% — more than double the national average of 8.3% — Réunion remains one of Europe's tightest labour markets. The contraction of public-sector employment, historically the engine of Réunion's job market, signals a structural shift. It weakens domestic consumption, strains social budgets, and raises the risk of skilled young people leaving for mainland France or other Indian Ocean territories.

Source: INSEE, Q2 2026 economic note, reported by Outremers 360 (October 2026).

Ne manquez rien de l'actualité business de l'Océan Indien

Rejoignez les décideurs qui lisent Business.OI chaque matin.

L'essentiel de l'éco de l'Océan Indien, chaque matin. S'abonner
Observatoire