Lower unemployment rate masks worrisome work prospects

Including those who stopped looking for work because they could not find any pushes the second-quarter unemployment rate 10 percentage points higher to 34.9%. (David Harrison, M&G)

Including those who stopped looking for work because they could not find any pushes the second-quarter unemployment rate 10 percentage points higher to 34.9%. (David Harrison, M&G)

Although the latest Quarterly Labour Force Survey by Stats SA shows the unemployment rate in South Africa decreased from 26.4% in the first quarter of 2015 to 25% in the second quarter, the bigger picture is more worrisome.  

The survey looks at the labour market activities of people aged 15 to 64 who live in South Africa.

The number of unemployed people decreased for two consecutive quarters in the third and fourth quarter of 2014. Following an increase of 626 000 in the number of unemployed persons in the first quarter of 2015, unemployment decreased by 305 000 to 5.2-million in the second quarter of 2015.

The results for the second quarter show that of the 36-million working-age population, 15.7-million were employed, 5.2-million unemployed and 15.1-million not economically active.

The formal sector accounted for the largest share of employment at 69.2%, while agriculture accounted for the smallest share at 5.6%.

The discouraged accounted for around 16% of the not economically active population while more than 80% were not working for other reasons, such as being students or homemakers.

The number of employed people has increased for five subsequent quarters since the second quarter of 2014.

Historically, employment gains have been observed in the second quarter of every year.

The official unemployment rate decreased by 1.4 percentage points in the second quarter of 2015 compared with the first quarter of 2015.

Broader definition
When one takes the broader definition of unemployment, including those who stopped looking for work because they could not find any, the unemployment rate in the country was 34.9% in the second quarter compared with 36.1% in the first quarter.

FNB economists Jason Muscat and Alex Smith attribute the gain in employment between the first and second quarter as largely owing to the creation of 177 000 informal sector jobs.

They pointed out that there was a 1.5% increase on the quarter in the number of discouraged workers, which flatters the lower unemployment rate.

“While encouraging on the face of it, the lack of formal sector job gains will likely keep the labour market under significant pressure over the medium term,” they said, highlighting mining and manufacturing as particular concerns because of falling commodity prices and rising wage demands.

“Despite strong quarterly gains in the community services/public sector, increasing pressure for fiscal consolidation should see employment growth levels subside, and there is little evidence to suggest that the private sector can take up the slack.”

David Maynier, Democratic Alliance shadow minister of finance, said in reaction to the latest figures that there is a full-blown jobs crisis in South Africa.   

“About 321 000 people who wanted a job could not find a job, defined merely as ‘work for at least one hour’, in the first six months of 2015,” he said.   

“These figures also exclude the 2.4-million ‘discouraged job seekers’, who wanted a job but have given up looking for a job, in 2015.”   

He said it was “staggering that 5.2-million people cannot find a job, especially if one considers that, for every person who loses their job, about four people depend on them.

“The fact that 5.2-million people don’t have a job cannot be explained by external factors alone and has much to do with the government’s disastrous economic policy, which is killing investment, economic growth and jobs in South Africa,” said Maynier.   What is worse to him is that the unemployment rate may increase given that companies in the mining, metals and construction sectors are planning massive job cuts in 2015.

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