Uptick in jobs will boost spending while economic growth indicator starts sparking

The Reserve Bank’s composite leading business cycle indicator rose 0.4% in October to 93.6 points

THE formal sector added 7,000 jobs in the third quarter in anticipation of the busy festive season, while a leading indicator of economic growth is showing signs of life.

However, there are fears that the jobs bonanza may be short-lived.

Formal sector jobs swelled by 7,000 to 8.95-million, Statistics SA’s Quarterly Employment Survey figures show.

The bulk of the jobs were created in business services, trade and community services. However, mining and quarrying, manufacturing, construction and transport continue to shed jobs.

Investec economist Kamilla Kaplan said confidence among manufacturers and in the building sector remained low, bad news for job creation in both industries.

But the jump in employment — even though temporary — will support spending in the economy.

The positive job numbers may also be attributed to the economy growing slightly in the third quarter. Many factors including policy reforms, were needed to stimulate private sector investment and employment creation, said Ms Kaplan.

The Reserve Bank’s composite leading business cycle indicator rose 0.4% in October to 93.6 points after months of decline.

The indicator gauges how the economy will perform in months ahead.

Five of the 10 indicators surveyed increased, while the remainder decreased.

The slight improvement might seem to suggest better economic performance at the start of the fourth quarter, but Barclays Africa economist Peter Worthington said: “We are sceptical, given the large economic, sentiment, and political constraints on the economy at the moment.”

The bank’s indicator has been contracting since January, but the rate slowed in October. First National Bank Home Loans household and property sector strategist John Loos said a year-on-year improvement is good, but a 4.8% contraction remains dismal.

The major positive contribution to the bank’s composite leading indicator in October came from an increase in the survey measuring the average number of hours worked in manufacturing.

But the biggest negative contributions came from a decrease in residential building plans passed, the plunge in the Bureau for Economic Research’s business confidence index and fewer job advertisements.

The Employment Survey, meanwhile, also showed that above-inflation wage settlements supported employee earnings. Gross earnings amounted to R495bn in the third quarter. It represents a R15.5bn rise, or 3.2%, compared to the second quarter.

The biggest contributors to gross earnings were: the community, social and personal services industry at R5.5bn, or 3.5%; the financial intermediation, insurance, real estate and business services industry at R5.4bn, or 4.6%; and the manufacturing industry at R1.8bn, or 3.3%.

The community, social and personnel services industry is dominated by the public service. Public servants received a 7% wage increase this year.

However, generous wage increases have been cited by private sector businesses as one of the impediments to their ability to create more jobs.