Gloom for growing army of job seekers
Labour unrest, double-digit pay rises put brakes on opportunities
SOUTH Africa’s unemployment rate hit a three-year peak of 25.5% in the second quarter of this year, and is set to climb higher as the stuttering economy fails to create enough jobs to absorb a steady flood of new entrants to the labour market.
The rise from 25.2% in the first quarter was the third rise in a row, and shows the economy is sliding deeper into stagflation, defined as a toxic mix of rising inflation, slowing growth and high unemployment.
The Quarterly Labour Force Survey released by Statistics SA on Tuesday showed that unemployment rose by 87 000 to 5.2 million as 126 000 people joined the queue of job seekers.
“Employment is rising but not fast enough,” said Kefiloe Masiteng, deputy director-general for population and social statis- tics at Stats SA. “The population is growing as more people enter the labour market. We’ve reached 25.5%, and there is a risk towards a higher digit.”
According to the expanded definition of unemployment, which includes the number of people who have given up looking for work, the jobless rate rose to 35.6% in the second quarter from 35.1% in the first quarter.
The economy has to create about 150 000 jobs every quarter to stabilise unemployment.
The fact that growth has been slowing since 2011 is one of the main reasons for job creation being so sluggish.
Iraj Abedian, MD at Pan African Investment and Research, says the cost of business is rising steadily in response to the costs of a growing burden of legislation and rising electricity tariffs and municipal rates.
Another issue was the labour militancy demonstrated in a five-month strike in the platinum sector and a four-week work stoppage in manufacturing, which resulted in doubledigit wage increases that many small companies say are unaffordable.
Small and medium-sized business accounts for 65% of the labour force of 15.094 million.
“It’s a lethal mix — the combination is not a recipe for promoting business and creating jobs,” Abedian says.
“We are heading in the direction we have been heading in the last 20 years, which is greater capital intensity, greater automation and mech- anisation — not just in the primary and secondary sectors but in services as well,” says Adcorp labour analyst Loane Sharp.
A labour market index measuring job and wage security released by union Solidarity and ETM Analytics this week fell to 39.3 in the second quarter from 44.3 in the first — its lowest level since the 2009 recession.
A breakdown of the index, which has remained below the neutral level of 50 for three years, showed that employee confidence plummeted to a record low of 33.3 from 45.2 in the first quarter of the year.
At the same time, the labour affordability index, which measures the extent to which companies have to hire more staff or raise wages, fell to 40.1 from 44.4.
“What it definitely indicates is that the conditions for job growth in the private sector are not good at all,” says Paul Joubert, senior researcher at Solidarity.
Seven out of 10 sectors of the economy shed jobs in the second quarter, the Stats SA figures showed. The hardest hit was manufacturing, where employment fell by 60 000, bringing losses since the second quarter of last year to 90 000.
Coenraad Bezuidenhout, executive director of industry body Manufacturing Circle, says there will be further job losses as companies continue to mechanise and close down, a trend fanned by this year’s labour strikes.
“These strikes reverberate through the economy. Their aftershocks will be felt for some time to come,” he said. At its peak more than a decade ago, manufacturing used to account for nearly 25% of the economy compared with the current 15%.
Agriculture shed 39 000 jobs in the second quarter, followed by the finance and business sector, which lost 34 000, and construction, which shed 18 000, Stats SA says. Utilities lost 11 000 jobs and mining 5 000.
The losses were largely offset by a 103 000 increase in employment in community and social services — largely government jobs — which surged by 265 000 since the second quarter of last year.
This trend is seen as unsustainable, given that the jobs are paid for by taxpayers and are putting more pressure on government finances, leading to higher tariffs and more bond issuance, putting the entities deeper into debt.
The purchasing managers’ index for manufacturing fell to 45.9 in July from 46.6 the previous month, Kagiso Tiso Holdings says.