Unemployment is a major talking point in South Africa with government’s National Development Plan targeting a jobless rate of 14 percent by 2020 and 6 percent by 2030. Given the current level sits at 25 percent, there is a lot of work needed to be done, with many speculating that it’s not possible given the current trend. The latest numbers also don’t take into account the impending job cuts expected in the mining sector. Below is an interesting breakdown of the key trends from the second quarter jobs data from Stanlib’s Kevin Lings. – Stuart Lowman
by Kevin Lings*
Stats SA released the Labour Force Survey (LFS) for Q2 2015 today. The LFS is a quarterly household survey specifically designed to measure the dynamics of employment and unemployment in South Africa, including the informal sector as well as small-scale subsistence farmers. The following is a summary of the key trends in the labour market as at Q2 2015.
In Q2 2015, there were 35.955 million people aged between 15 and 64 years in SA (up 156,000 relative to Q1 2015, and up 623,000 over the past year).
Among these people:
20.887 million were economically active (down 107,000 relative to Q1 2015, and up 639,000 year-on-year)
15.657 million were employed (up 198,000 relative to Q1 2015, and up 563,000 year-on-year)
5.230 million were unemployed (down 305,000 relative to Q1 2015, but up 76,000 year-on-year)
As mentioned above, the number of employed people rose by an encouraging 198,000 in the second quarter of the year, after an increase of 139,000 jobs in Q1 2015 and a gain of a massive 563,000 over the past year. This is in sharp contrast with the Quarterly Employment Survey (QES), which indicated that SA had lost 44,000 formal sector jobs in Q1 2015 and that formal sector employment had declined by 43,000 jobs over the past year. However, the LFS does indicate that 50% of the jobs created over the past year were in the agricultural sector and that a further 35% were in the informal sector. On the whole, informal sector jobs as well as agricultural employment are paid significantly less than the equivalent number of people employed in the formal sector. In other words, if South Africa had created 563 000 jobs over the past year in the formal sector then the economy would be booming and not slowing as a broad range of economic data currently suggests.
In calendar 2014, South Africa created a total 143,000 jobs, which is not especially encouraging given the existing high rate of unemployment, coupled with the expansion in the labour force. The labour market unrest in the mining and manufacturing sectors in 2014 was clearly very unhelpful. In the first six months of 2015 the economy has reportedly created 337,000 jobs (mostly in the informal sector) and since the low point in 2010, South Africa has gained a total of just over 2 million jobs, taking total employment to another record high. Once-again, it needs to be remembered that this total includes informal sector employment, which now comprises 17% of total employment. If private household employment is added to this, the percentage jumps to 25% of total employment.
The official unemployment rate in South Africa fell to 25.0% in Q2 2015. This compares with a near-term high of 26.4% in Q2 2015. According to the expanded definition, the unemployment rate is 34.9%, down from 36.1% in Q2 2015 (this includes discouraged workers). According to the expanded definition, the unemployment rate for the youth (younger than 25) is at an incredible 63.1%.
Clearly, the latest labour market data remains discouraging, although there is some comfort in the fact that according to the report the formal sector of the economy is not shedding jobs and that informal sector employment is helping to offset some of the job losses in other sectors of the economy.
Overall, despite the recent improvement, South Africa’s unemployment rate remains exceedingly high by global standards. Furthermore, the high rate of unemployment contributes to much of the social tension and anguish experienced in South Africa on a daily basis, especially among the youth. Increasing employed in South Africa has to be the number one economic/political/social objective.
There is still a significant divergence in the employment data reported by the Labour Force Survey versus the Quarterly Employment Survey. While the potential sampling error in SA’s quarterly household data is significant, it is crucial that South Africa’s employment data is as accurate as possible since it is, ultimately. the most important economic indicator in the country.
*Kevin Lings is chief economist at Stanlib