SA’s unemployment rate surprised in the second quarter, falling more than expected, helped by a sizeable increase in formal sector employment.
But at 32.6% it remains exceedingly high by historical and international standards.
Stats SA data released on Tuesday show the official unemployment rate edged down by 0.3 percentage point from 32.9% in the first quarter and pulled back from 35.3% at the end of 2021. SA managed to create more than 2-million jobs in the past seven quarters.
The recovery of almost all of the jobs lost at the height of pandemic-induced restrictions largely reflects the reopening of SA businesses after the Covid lockdown measures. Still, the post-pandemic rebound in jobs masks a more troubling reality.
The unemployment rate according to the expanded definition decreased 0.3 percentage point to 42.1% in the second quarter, helped by a reduction in discouraged workers as more people try to find jobs.
The economy added 153,914 jobs in the second quarter, a 1% quarterly increase compared with the first three months of the year. The increase in quarterly employment was broad-based, with six out of 10 sectors recording job gains. The construction sector added the most quarterly jobs at 103,815.
FNB senior economist Thanda Sithole said that with the agricultural sector adding 6,825 jobs from the first to the second quarter and 20,624 year on year, the recovery in the formal non-agricultural sector is effectively complete.
Stanlib chief economist Kevin Lings said there were fears that the increase in electricity outages during the last quarter of 2022 and the first quarter of this year would result in substantially more job losses.
“Instead, the economy added 581,000 jobs in the past nine months, suggesting a high degree of resilience within the broader labour market,” said Lings. “Many businesses are acutely aware of the difficulty in finding skilled individuals in SA, and don’t want to risk losing skilled individuals or close key areas of their business.”
Lings said that a couple of sectors recorded decent growth in the past 12 to 24 months, especially the fast-food and takeaway industry, as well as the renewable energy sector.
“The recent surge in renewable energy investment most likely explains the recent strong rise in construction employment, which has increased by 128,000 jobs over the past 12 months and by 104,000 jobs in the past quarter,” he said.
But the good news ends there. Economic weakness, alongside the effect of load-shedding and logistics challenges, continues to pose a downside risk to labour market momentum.
The labour market is still 182,000 jobs below the peak employment level achieved in 2018’s fourth quarter. It is only 36,000 jobs below the level that prevailed before the start of Covid-19.
The latest data shows that the manufacturing; electricity, gas & water supply; and financial intermediation sectors shed a significant number of jobs. Manufacturing lost 96,260 jobs quarter on quarter, while the electricity, gas & water supply sector lost 5,755 jobs, and the financial intermediation, insurance, real estate and business services sectors lost 68,066.
The Stats SA headline unemployment number shows that while the unemployment rate came in 0.2 percentage point lower than Reuters’ consensus expectations, the youth unemployment rate continues to be exceedingly high. It came in at 60.7% in the second quarter and at 70.1% when using the expanded definition.
Lings said that it is clear that youth unemployment remains SA’s most important economic challenge and highlights the extreme difficulty young people experience in trying to obtain their first job opportunity, irrespective of qualifications. “Despite the job gains over the past seven quarters, the SA economy has failed to keep pace with the growth in the population over an extended period, and Covid-19 aggravated an already desperate situation.”
The government’s emphasis on infrastructural development and policy reform needs to gain significant momentum to lift the growth rate above 3% a year, said Lings. Anchor Capital investment analyst Casey Delport said that tackling youth unemployment requires comprehensive and sustainable strategies that encompass education reform, job creation and inclusive economic growth.
Delport said that regardless of the exact details in the data, job creation in the economy has occurred only when GDP growth approaches 3% a year. Absa senior economist Miyelani Maluleke said that the alarmingly high youth unemployment rate is a particular concern for long-term social and political stability.
“The ANC has mostly steered clear of fully populist economic policies, but the risk of such an approach — for example, on the social grants front — could increase as the ANC’s popularity wanes,” said Maluleke.
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