SA unemployment edges higher

Number of unemployed persons rises by 188 000 in 3Q15
According to Stats SA’s Quarterly Labour Force Survey (QLFS), total unemployment increased by 188 000 to 5.4 million in 3Q15 from 5.2 million in 2Q15. Over the same time period, the number of employed workers increased by 171 000, leaving the number of employed persons in SA higher at 15.8 million in 3Q15 relative to the 15.7 million recorded in 2Q15. The rate of unemployment in SA is arguably higher given the elevated number of discouraged work-seekers in SA (those who have given up looking for employment opportunities for a period longer than four weeks). The number of discouraged work-seekers remains high at 2.2 million, although it has come down from a peak of 2.5 million in 3Q14.

Employment gains in both formal and informal sectors in 3Q15
Of the 171 000 jobs created in 3Q15, 95 000 came from employment generated in the formal sector, taking total formal employment higher to 10.9 million. 60 000 Informal jobs were created in 3Q15 with the agriculture sector creating an additional 28 000 jobs while private households (including domestic workers and gardeners) shed 12 000 jobs over the corresponding period.

Within the formal sector, quarterly job gains in 3Q15 were the highest in the construction (+59 000) and trade industries (+81 000), followed by a 34 000 increase in the government sector. Jobs continued to be shed in the utilities (-9 000), transport (-24 000) and financial services (-4 000) sectors in 3Q15.

Massive overrun in government’s wage bill
After accounting for the exorbitant increases in housing and medical allowances, the public sector wage bill ended up being 10.1% higher than the budgeted-for 7.7% increase. This resulted in a significant R63.9 billion overrun which government expects to fund out of the contingency reserve (funds reserved for unforeseen circumstances) as well as from further cutbacks on wasteful goods and services expenditure. Government warned that cuts to capex may occur in various government departments in order to fund the larger-than-anticipated wage bill. Although Treasury has committed to freezing the headcount in the public sector (in order to prevent a larger overrun in the total wage bill), government appears to have created another 34 000 jobs over 3Q15 which has resulted in a 1.9% y/y increase in public sector jobs.

Unemployment rate for those with tertiary schooling has edged higher since the financial crisis. Unemployment rates remained highest for the Black (28.8% in 3Q15 from 27.9% in 2Q15) and Coloured (22.8% in 3Q15 from 24.4% in 2Q15) populations and lowest for the Asian (12.5% in 3Q15 from 13.4% in 2Q15) and white populations (5.9% in 3Q15 from 7.0% in 2Q15).

Unemployment rates were highest for those who did not complete secondary schooling at 32.5% and lowest for those with a tertiary education (7.6%). Nonetheless, unemployment rates today are 2.3% higher for those with a tertiary education than they were in 1Q08, suggesting less favourable hiring conditions in the post-crisis environment even for those with a higher level of education.

No changes to pedestrian SA growth and employment view
Low growth of below 1.5% this year and 1.7% in 2016 is unlikely to support a significant recovery in employment growth in 2016. Subdued growth prospects and fragile business confidence continue to suggest a challenging environment for job creation and higher rates of fixed investment.


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