South Africa University Student Portal

Stats SA released the Labour Force Survey (LFS) for Q4 2010 today. The LFS is a quarterly household survey specifically designed to measure the dynamics of employment and unemployment in South Africa, including the informal sector as well as small-scale subsistence farmers.
The following is a summary of the key trends in the labour market as at Q4 2010 (see charts attached for further information).
In Q4 2010, there were 32.193 million people aged between 15 and 64 years in SA (up 121 000 relative to Q3 2010, and up 504 000 year-on-year).
Among these people:
17.269 million were economically active (down 102 000 relative to Q3 2010)
13.132 million were employed (up 157 000 relative to Q3 2010)
4.137 million were unemployed (down 259 000 relative to Q3 2010. However, the number of discouraged workers increased by a further 117 000 in the quarter)
This implies that the official unemployment rate is now at 24%, having improved significantly from 25.3% in Q3 2010 and 24.2% a year-ago. This is the lowest rate of unemployment recorded in South Africa since Q2 2009. Using the expanded definition, the unemployment rate is a frightening 35.8%; reflecting the high level of discouraged workers.
The debate around the accuracy of SA’s unemployment data continues, especially the debate around the size of the informal sector. Some analysts argue that the informal sector is significantly larger and growing faster than what is officially reported. Hopefully, the debate is resolved speedily and adequately given the importance of the data.
As mentioned above, the number of employed people rose by an encouraging 157 000 in Q4 2010 relative to Q4 2010. Despite the recent rise, for 2010 as a whole employment fell by a total of 118 000, which is significant in an economy that already has an unacceptably high unemployment rate.
Most of the jobs lost in Q4 2010 were in the formal sector (120 000); the rest of the job gains occurred in the informal sector (53 000). Interestingly, the agricultural sector lost 13 000 jobs during the quarter, despite the improved agricultural season, while private household shed a further 2 000 jobs. Worryingly, the number of discouraged work seekers increased by a further 117 000 in Q4 2010 (440 000 over the past year) and the labour absorption rate (percentage of people at working age with jobs) remains extremely low at 40.8% in Q4 2010.
Fortunately, the improvement in the latest employment data suggests that SA has past the worst of the unemployment cycle and could expect further gains in employment during 2011. The key question is now how many jobs can SA create? The New Growth Plan has set a target of creating 5 million jobs over the next 10 year. The is a worthy target, but also a very ambitious target. Hopefully the policy will increasingly focus on how to create these jobs in the private sector and not merely look to add jobs in an already bloated public sector. The President’s State of the Nation address this week as well as the National Budget on 23 February should focus heavily on government’s initiatives to create jobs.
Although there is clear evidence that the economic recovery is under-way, the private sector still appears fairly reluctant to expand employment in a meaningful way. Most of the jobs gained over the past quarter have been in the public sector. According to Stats SA manufacturing added 70 000 jobs in Q4 2010. This result is a little surprising given the still weak employment index within the Kagiso PMI.
Employment is typically a lagging economic indicator, however, SA has now experienced positive growth for six consecutive quarters (including a gain in Q4 2010), has 37-year low interest rates and has hosted one of the largest sporting events in the world; all of which should ideally have led to a better employment outcome than the country is currently experiencing.
Clearly, job creation is not merely a function of interest rates or the cost of capital. Other important policies play a crucial role in facilitating job creation, namely fiscal policy, labour policy, education policy, competition policy, industrial policy, trade policy, exchange rate policy etc. (Asking monetary policy to consistently solve all of SA’s economic woes is unfair and unrealistic). SA’s high unemployment requires a far more holistic solution.
South Africa’s unemployment rate remains far too high by historical and international standards, and clearly contributes to much of the social tension and anguish experienced in South Africa on a daily basis. As we have stated on many occasions, increasing the number of people employed in South Africa has to be the number one economic/political/social objective.
Article by Times LIVE