Of all the economic indicators which bombard us, employment is the most important. The news on this front this week was bad, with economists saying more bad news is on the way.
South Africa’s unemployment figures jumped to 23.5%, or 208 000 lost jobs, up from 21.9% in the fourth quarter of 2008. Year on year, however, this figure remains unchanged from that at the beginning of 2008.
However, according to economist Mike Schussler, if the number of discouraged job seekers is included in calculations the unemployment rate jumps to more than 30%.
The increase in joblessness shows that government’s ambitious infrastructural development programmes are not doing enough to keep people in work.
Stanlib economist Kevin Lings says most job losses came from people under the age of 35. This indicates that young workers, with less experience, fewer skills and often employed on a temporary or contract basis are most vulnerable to job losses, says Lings.
He says the fact that more experienced and skilled workers are being retained suggests that while employment numbers are down, the total income earned in South Africa may not be as acutely affected.
The flip side, says Lings, is that ”those who can least afford it are becoming unemployed”.
Job losses in the last quarter were chiefly in the trade sector, which chalked up a loss of 143 000 jobs. Sectors such as construction and manufacturing also contributed, with construction job losses up by 65 000.
Construction sector job losses would suggest that government’s grand infrastructure development spending programme may not be giving the economy the boost it requires.
But, argues Lings, the sector includes both building at a residential and commercial scale and large infrastructure construction.
”There is an indication of a slow-down in residential building and increasingly commercial building, dominated by smaller contractors who have either gone out of business or are cutting down on their teams,” argues Lings.
But, when it comes to large-scale construction, companies generally have full order books and many of their projects are for the infrastructure build.
”We are not expecting this part of the sector to weaken, but we are also not expecting it to accelerate either,” says Lings.
”It is unrealistic to think that the infrastructure programme will compensate for job losses.”
Lings expects things to get worse. Companies in South Africa are taking a number of steps to cope with the worsening economic climate, including implementing a hiring freeze, putting employees on short time and cutting back on staff.
”All of this is happening with no significant expansion of the private sector.”
There are, however, some mitigating factors that may soften the blow. In some sectors particularly those focused on large sporting events such as the Confederations Cup and Fifa World Cup employment may yet be created by organisational and logistical needs around the events.
The skills shortage is still a concern for companies and where they have invested in obtaining and keeping skilled labour companies will be more cautious about letting them go, dampening the chances of further job losses.
The government, however, could come under additional pressure as business conditions deteriorate. Large state-owned entities such as South African Airways and Eskom have already applied for extensive support from government.
In addition the National Energy Regulator recently rejected Trans-net’s application for an increase in its petroleum pipeline tariff and decreased it by 10%. The increase was intended to fund the building of a new pipeline inland and indications are that Transnet may have to look to the government for funds. This will put more pressure on the fiscus.
Combined with increased applications for social assistance as work dries up, the state will feel the pinch.
But Lings argues that relative to international performance South Africa is doing far better than many developing economies.
”Many governments are bailing out industries and that is something we are not doing,” he says.
”It is also favourable that [state] money is going towards expansion rather than survival.”
