According to Stats SA, the formal (non-agricultural) sector of the SA economy rose by an encouraging 41 000 jobs in Q2 2010, based on yesterday’s release of the Quarterly Employment Survey (QES). This follows a decline of 77000q/q in Q1 2010. This QES survey is much better than the loss of 61 000 reported by Stats SA in the Quarterly Labour Force Survey (QLFS) that was published in July 2010. However the QLFS survey includes both formal and informal sector jobs, as well as the agricultural and private household sectors. This discrepancy between the QLFS and the QES remains a concern, although the basis for the two surveys is completely different in that the QLFS is a household survey, while the QES is an industry based survey.
A breakdown of the 41 000 job gains by sector indicates that most of the jobs were gained in the service sectors of the economy, especially business and financial services (25 000), community services (28 000) and retail trade (5 000). In contrast, the manufacturing sector shed 17 000 jobs, while the construction industry lost 5 000 employees. Over the past year, the formal sector has lost 114 000 jobs. Fortunately, the most recent data on employment suggests that the labour market has started to stabilize, with some sectors showing signs of a modest improvement.
It is worthwhile to note that the quarterly changes in employment are not seasonally adjusted. The seasonal variation in employment can be very significant, especially in sectors such as retail trade when measured between the final quarter of the year and the first quarter of the following year. Additionally, the hosting of the World Cup would have generally boosted employment, although in reality this impact was probably relatively modest.
It is also encouraging that gross earnings in the formal sector rose by 1.8% in Q2 2010, compared with Q1 2010; gaining a substantial 14.6% over the past year. The reason that annual incomes rose despite the job losses, is that the average monthly earnings per employee in the formal sector rose by a dramatic 19.2% over the year to the end of May 2010 (well in excess of inflation).
Given the latest round of wage negotiations, incomes look set to keep rising above inflation. The rise in household incomes, coupled with 30 year low interest rates should systematically reflect in increased consumer activity, especially if the job market improves further. Obviously, at the same time the rise in incomes poses some potential upward risk to domestic inflation going into 2011, especially given the low base in inflation that has formed. The latest employment and earnings data argues against any further reduction in interest rates.
Overall, the employment situation in South Africa appears to be slowly stabilising with tentative signs of improvement. The overall level of unemployment remains absurdly high by international and historical standards (whether the assessment is based on the QES or QLFS survey) and clearly SA’s number one economic concern.
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