According to Stats SA, formal (non-agricultural) employment in SA rose by an encouraging 59 000 jobs in Q3 2011; based on today’s release of the Quarterly Employment Survey (QES). This follows an increase of 11 000 in Q2 2011 and 38 000 in Q1 2011.
Over the past year, SA has added 204 000 formal sector jobs. While this is a reasonable outcome given the difficult world economic conditions, it is far below the level of job creation required for South Africa to meaningfully reduce the rate of unemployment.
The most recent data on SA employment suggests that while the formal labour market has stabilised (reflected in the fact that the formal sector has added jobs in each of the past 6 quarters) the rate of improvement remains fairly modest. More positively, the job gains appear reasonably broad-based with 6 of the 7 major private sectors of the economy gaining jobs in Q3 2011.
A breakdown of the 59 000 job gains in Q3 2011 indicates that most of the jobs were gained in the service sectors of the economy, specifically business services, with a gain of 18 000 jobs, and the retail trade sector (+7 000). There was also an encouraging, but somewhat surprising, increase in construction employment of 15 000. This is the third quarterly increase in construction employment following 2 years of relatively sever job losses.
The manufacturing sector added a very modest 3 000 jobs in Q3 2011, but has shed jobs in 12 of the last 15 quarters. It is extremely distressing to see that the manufacturing sector has lost a total of 164 000 jobs since the beginning of 2008.
The government sector added a further 7 000 jobs in Q3 2011 and has added 89 000 jobs over the past year (44% of all formal sector jobs created in the past year have been in the public sector).
It is important to note that the quarterly changes in employment are not seasonally adjusted. The seasonal variation in employment can be very meaningful, especially in sectors such as retail trade when measured between the final quarter of the year and the first quarter of the following year.
Gross earnings in the formal sector rose by a relatively robust 11.4%y/y in Q3 2011; although this improvement has to be measured against the fact that inflation is rising, and will probably continue to exceed 6% in the coming months.
Overall, the employment situation in the formal sector of the economy appears to have at least stabilized relative to the extreme weakness in 2009 and early 2010; with tentative signs of improvement in recent quarters. Despite this 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 is clearly SA’s number one economic concern.
Importantly, the improved labour market conditions, coupled with the rise in unsecured credit and ongoing real wage growth, is probably helping to keep the retail sector relatively buoyant heading into the xmas season. Unfortunately, much of the retail demand is being satisfied through imports and has not provided a boost to the local manufacturing sector (see chart attached on the divergence in performance between the retail sector and the manufacturing sector).
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