UNEMPLOYMENT RATE BUCKS TRENDS
World unemployment is at its lowest in 40 years, but not in South Africa
While global unemployment has fallen to its lowest in 40 years, SA is among four countries with an unemployment rate higher than that immediately preceding the 2007-08 global financial crisis.
The worldwide unemployment rate dropped from 8% in 2010 to 5.2% in September, according to a report by investment bank UBS – the lowest level since the 5% unemployment rate recorded in 1980. The steep decline has been attributed to more flexible working practices, lower wages and rock-bottom interest rates. The decline is also largely due to sharp falls in unemployment in industrialised countries.
But unemployment in Greece, Italy and Spain is about 2 percentage points higher than the pre-crisis level of December 2007, and in SA it’s 5.4 percentage points higher.
The UBS survey covered 48 developed and emerging economies that between them account for 84% of global output. The report categorises someone as employed if he or she did any paid work in a week. SA’s unemployment is nearing 30%. Stats SA’s employment survey, expected on Tuesday, is likely to reflect weak labour market dynamics consistent with persistently weak economic activity, said Investec economist Kamilla Kaplan.
The UBS report notes that SA will struggle to get growth above 2% because of “sluggish investments”.
While data from last week showed SA emerged from its first recession since the global financial crisis, growth remains weak. National Treasury expects growth of 0.7% this year, while the Reserve Bank expects 0.6%. UBS predicts growth of just 0.5%.
SA has not breached the 2% mark since 2013. But Nedbank senior economist Nicky Weimar warned these figures simply indicate a recovery from the low base recorded in the first two quarters of the year; they’re not indicative of improved momentum in the economy. “An improvement can only take place in the presence of meaningful job creation, which is unlikely to occur in the absence of meaningful structural reform that encourages investment,” she said.
But UBS said the economy may benefit from some of the government’s policy movements, including finalisation of the mining charter and withdrawal of the Mineral & Petroleum Resources Development Amendment Bill, alongside spectrum allocation and governance changes at stateowned enterprises. The bank also forecast some recovery in corporate and foreign investments in 2019-20. —