Jobs growth may not be happening fast enough
MUCH HAS BEEN MADE OF SA’s blistering pace of economic growth last year. Quarterly growth in the fourth quarter of 2006 came in at an annualised 5,6%, well above market expectations and the fastest in two years. But the acid test still awaits the SA economy.
The crucial issue SA faces is whether its economic growth will generate enough jobs to make a meaningful difference to unemployment. Government’s target is to halve the unemployment rate by 2014 to 14%. It’s not yet clear that this will happen, despite the fact that economic growth is on target.
Economic growth has averaged 5% over the past three years. This is above Government’s interim target of 4,5% until 2009. From 2010, growth is targeted at 6% or more. That aim, once so elusive, appears to be in sight. Excluding agriculture, quarterly annualised growth was 6% in the fourth quarter. If it hadn’t been for the recession in agriculture, SA would have reached its ultimate target.
But, however gratifying that is, it’s not good enough if it doesn’t generate enough jobs. It will only be once Statistics SA releases the Labour Force Survey (LFS) later this month, which provides labour market data for September 2006, that we will know whether job creation is keeping pace.
The last release of the LFS, though it showed good growth in jobs, wasn’t very encouraging when it comes to the unemployment rate. The LFS showed the unemployment rate stood at 25,6% in March 2006 – down from 26,5% a year earlier.
Although there was a sizeable number of new jobs created – 544 000 – this didn’t make a very big dent in the unemployment rate because of the large number of new entrants to the job market. If the unemployment rate continues to fall annually at the same pace as in the year to March 2006, it will be 16,6% in 2014.
Depending on what the next LFS shows, the issue economic policymakers face is how to get growth to become more labour-absor- bent. Trouble is, much of the kind of growth SA is experiencing isn’t conducive to absorbing high numbers of unskilled labourers. The biggest sector in the economy, at 19,7% of gross domestic product (GDP), is finance, real estate and business services, which grew at an annualised 7,2%. This sector demands skilled labour.
However, manufacturing, which was the biggest contributor to GDP growth, has the potential to create jobs for semi-skilled labour. The sector can be expected to have created jobs, as the Investec Purchasing Managers’ Index (PMI) shows that the employment index is above 50, which indicates expansion.
The problem of absorbing large numbers of unskilled workers suggests that economic growth alone won’t do the job. It suggests there’s a role for policies such as the Extended Public Works Programme. The programme has created about 385 000 jobs in the first two and a quarter years of its existence.