Little optimism for jobs rate despite confidence boost

● A sharp contraction in mining output and a decline in manufacturing in March, following an improvement in business confidence in the first quarter and forecasts for better economic growth, mean that the outlook for employment data is uncertain.

Improvements in the political climate since the ANC’s elective conference in December boosted business confidence in the first quarter of the year, which could lift the jobs data that will be published in the Quarterly Labour Force Survey on Tuesday.

Higher growth is also forecast. The IMF in its regional economic outlook this week revised South Africa’s economic growth to 1.5% for 2018 — in line with the National Treasury’s prediction — and 1.7% in 2019.

But mining production fell 8.4% in March compared to a year before — its biggest contraction in two years, which John Ashbourne, Africa economist at Capital Economics, called “dispiriting”. Manufacturing fell 1.3% in March compared to the previous period last year as the stronger rand hit exports.

But Johannes Khosa, an economist at Nedbank, said firmer global economic growth and higher commodity prices had supported business confidence and should encourage fixed investment activity and job creation.

Losses outweigh gains

Even so, Khosa expects the unemployment rate to remain “structurally high at around 26% in the short term”.

According to Stats SA, job gains in the informal sector and agriculture in the fourth quarter of last year were more than cancelled out by job losses in other sectors. It said the economy lost 21 000 jobs in the period.

Miyelani Maluleke, an economist at Absa, said sectoral surveys by the Bureau for Economic Research showed that hiring intentions were still “fairly downbeat” across major sectors. “The economy is simply just not growing fast enough to make a meaningful dent to the unemployment rate at the moment.”

Jeffrey Schultz, economist at BNP Paribas, expected a quarter-on-quarter improvement in employment but said: “This will not necessarily translate into a significant improvement in the unemployment rate, as much depends on the labour force participation rate.”

Schultz said the entry of new labour market participants meant that even a rise in the absolute number of employed in the first quarter might not have much of a positive impact on the unemployment rate.

It could get worse

“The unemployment rate . . . could even deteriorate slightly as the economy is not yet in a position to all of a sudden become massively labour absorbing,” he said. “As such we are not expecting to see much change in the unemployment rate from the 26.7% recorded in the [fourth quarter] last year.”

Philippa Rodseth, executive director for the Manufacturing Circle, said the sector had set itself a target of creating one million jobs in the next 10 years. The current employee base is just shy of 1.8 million.

“Even though you see this positive sentiment, [which is] a very good start, to see it translating into jobs one needs to give it time.”