Any good news on employment is to be welcomed, and the latest news from Stats SA is better than expected. But there are sobering details that point, again, to the urgent need to lift SA’s economic growth rate.
The economy created 294,000 jobs in the third quarter of this year, after the number of jobs declined in the second quarter. This is according to the quarterly labour force survey, a household survey that picks up both formal and informal work, as well as agriculture and domestic work.
The third-quarter employment boost helped to reduce the unemployment rate from 33.5% to 32.1%. This was lower than the 32.8% the market had expected — though it was helped too, unfortunately, by more people giving up looking for work, so defining themselves out of the labour force.
More than half of the new jobs in the third quarter (165,000) came from the informal sector, though the formal sector picked up too, as did agriculture, while domestic jobs dwindled. The largest increases were in construction, transport and the community services; sectors such as finance and manufacturing saw a decrease.
The third-quarter data is a good sign for third-quarter economic growth data, which is expected to improve on the rather dismal first half of this year, especially given that there has been no load-shedding since March.
The improved jobs numbers no doubt reflect that too, with small businesses especially benefiting from more stable Eskom supply — as the tax numbers also showed.
Yet job creation is still lagging far behind the rate at which people are coming on to the labour market. And while it’s good that the informal sector is absorbing more people and creating more livelihoods, these jobs are often insecure and low paid, and we should ideally be seeing a stronger improvement in formal sector employment as well.
But, as Stanlib economist Kevin Lings points out, if one looks at the trend over the past year this is not the case. The latest figures show the number of people in employment is up 201,000 over the past 12 months, which is behind the 363,000 joining the labour force over the period. Worse, all the jobs created over the year were in the informal sector — the formal sector showed a net loss.
That underlines the urgency of reforms to boost investment and growth. The Reserve Bank has cited studies that show that the multiplier effect of economic growth on job creation in SA is about 0.6 — higher than many other emerging market economies. In other words, when the economy grows, it creates employment at a pretty rapid pace — as we saw in the early 2000s, when it was growing at about 5% a year and the unemployment rate was falling.
It’s important to ensure that unemployed young people can gain the skills, experience and access to the labour market that they need. But boosting employment on a sustainable basis is not about publicly funded employment programmes nor about interventionist industrial policies.
A blog this week from the IMF urges governments in Africa that need urgently to create jobs to be cautious with industrial policies that target specific sectors, which can be expensive, distortionary and pose corruption risks.
Rather, they must prioritise measures that benefit multiple sectors — such as improving competition and investing in important infrastructure. And they must break down barriers to private business growth.
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