Stats SA released the Labour Force Survey (LFS) for Q1 2011 yesterday. The LFS is a quarterly household survey specifically designed to measure the dynamics of employment and unemployment in South Africa, including the informal sector and the small-scale subsistence farmers.
The following is a summary of the key trends in the labour market as at Q1 2011:
In Q1 2011, there were 32.314 million people aged between 15 and 64 years in SA (up 121 000 relative to Q4 2010, and up 496 000 year-on-year).
Among these people:
- 17.482 million were economically active (up 213 000 relative to Q4 2010)
- 13.118 million were employed (down 14 000 relative to Q4 2010)
- 4.364 million were unemployed (up 227 000 relative to Q4 2010. However, the number of discouraged workers increased by a further 73 000 in the quarter)
This implies that the official unemployment rate is now up at 25%, having increased by 1% since Q4 2010. Using the expanded definition, the unemployment rate is well above 30%, therefore reflecting the high level of discouraged workers.
As mentioned above, the number of employed people fell by a very disappointing 14 000 in Q1 2011 relative to Q4 2010. This loss in employment occurred mainly in the informal sector (-46 000) and in agriculture (-24 000); and could be partly related to seasonal factors. In contrast, the formal sector added a more encouraging 56 000 jobs in the quarter.
Over the past year, SA’s labour market is still not all that encouraging. The economy has added a mere 42 000 in the past twelve months, which is well below any acceptable target level. Most of the gains in the past year have been in the informal sector (+125 000), while the formal sector has only added 22 000. Unfortunately, these gains were largely offset by losses in agricultural employment (-55 000) and domestic workers (-49 000).
Worryingly, the number of discouraged work seekers continues to rise, increasing by a further 73 000 in Q1 2011 (353 000 over the past year) and the labour absorption rate (percentage of people at working age with jobs) remains extremely low at 40.6% in Q1 2011.
More positively, the trends in the employment data suggest that SA is past the worst of the unemployment cycle and could expect further gains in employment during 2011/2012. The key question is now how many jobs can SA create? The New Growth Plan has set a target of creating 5 million jobs over the next 10 years. This is a worthy and yet also 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).
There is clear evidence that the economic recovery is well under way, however, the private sector still appears fairly reluctant to expand employment in a meaningful way (PMI data released yesterday shows an employment index that remains below 50). Most of the formal jobs gained over the past few quarters have been in the public sector.
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 bolder and far more holistic 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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