Stats SA released the Labour Force Survey (LFS) for Q2 2011 today. The LFS is a quarterly household survey specifically designed to measure the dynamics of employment and unemployment in South Africa, including the informal sector as well as small-scale subsistence farmers. The following is a summary of the key trends in the labour market as at Q2 2011 (see charts attached for further information).
In Q2 2011, there were 32.453 million people aged between 15 and 64 years in SA (up 121 000 relative to Q1 2011, and up 489 000 year-on-year).
Among these people:
- 17.663 million were economically active (up 181 000 relative to Q1 2011);
- 13.125 million were employed (up 7 000 relative to Q1 2011); and
- 4.538 million were unemployed (up 174 000 relative to Q1 2011; however, the number of discouraged workers fell by 16 000 in the quarter).
This implies that the official unemployment rate is now up at 25.7%, compared with 25% in Q1 2011. This is the highest level of unemployment SA has experienced in well over 5 years. Using the expanded definition, the unemployment rate is well above 30%, reflecting the high level of discouraged workers.
As mentioned above, the number of employed people rose by a very disappointing 7 000 in Q2 2011 relative to Q1 2011. This gain in employment occurred exclusively in the informal sector (+34 000). In contrast, the formal sector shed 21 000 jobs, while agriculture lost 5 000 and private households lost 1 000.
SA’s labour market performance remains deeply disappointing. Over the past year, the SA economy has added a mere 64 000, which is well below any acceptable target level. Most of the gains in the past year have been in the formal sector (+110 000, almost all in government), and the informal sector (+27 000). Unfortunately, these gains were partly offset by losses in agricultural employment (-32 000) and domestic workers (-40 000).
Worryingly, the number of discouraged work seekers increased by a further 269 000 over the past year and the labour absorption rate (percentage of people at working age with jobs) remains extremely low at 40.5% in Q2 2011.
More positively, the trends in the employment data suggest that SA is past the worst of the job-cutting cycle (see chart 3 attached) and could expect more meaningful gains in employment during 2012. The key question now is: how many jobs can SA create?
The New Growth Plan has set a target of creating 5 million jobs over the next 10 year. The is a worthy target, but also a very ambitious target. Hopefully the policy will increasingly focus on how to create these jobs in the private sector and not merely look to add jobs in an already bloated public sector (which has been the trend in the past couple of years).
Employment is typically a lagging economic indicator, however, SA has now experienced positive growth for seven consecutive quarters (including a gain in Q1 2011), has 37-year low interest rates and has hosted one of the greatest sporting events in the world; all of which should ideally have led to a better employment outcome than the country is currently experiencing.
Clearly, job creation is not merely a function of interest rates or the cost of capital. Other important policies play a crucial role in facilitating job creation, namely fiscal policy, labour policy, education policy, competition policy, industrial policy, trade policy, exchange rate policy etc. Asking monetary policy to consistently solve all of SA’s economic woes is unfair and unrealistic. SA’s high unemployment requires a far more holistic and bolder solution.
South Africa’s unemployment rate remains far too high by historical and international standards, and clearly contributes to much of the social tension and anguish experienced in South Africa on a daily basis. As we have stated on many occasions, increasing the number of people employed in South Africa has to be the number one economic/political/social objective.
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