Acid test

Jobs growth may not be hap­pen­ing fast enough

Finweek English Edition - - Openers - GRETA STEYN

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.

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