Improvement in unemployment rate, but SA still needs almost 8 million jobs

Although the Quarterly Labour Force Survey for the fourth quarter of 2024 shows an improvement in the unemployment rate, South Africa still needs almost 8 million jobs, but these jobs will not be created in an environment of weak economic growth.

According to Statistics SA’s Quarterly Labour Force Survey (QLFS), a household-based employment survey, there was an increase in total employment during the fourth quarter of 131 669 jobs compared to the third quarter, when there was an increase of 293 840 jobs.

The faster increase in employment compared to unemployment resulted in the official unemployment rate falling by 0.2 percentage points to 31.9%. The absorption rate also increased by 0.2 percentage points to 41.1%, the highest level since the 42.1% recorded in the first quarter of 2020, suggesting a steady improvement in the economy’s ability to create jobs and absorb workers, Thanda Sithole, senior economist at FNB, says.

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Youth unemployment remains critically high

However, she notes that despite this, youth unemployment remains critically high, with the jobless rate for the age group 15 to 24 falling to 59.6% from 60.2%, while it declined to 39.4% from 40.4% for the age group 25 to 34.

Sithole says this data underscores the urgent need to accelerate pro-growth structural reforms to drive sustainable and inclusive economic expansion.

Formal jobs in the public sector decreased in the community and social services sector by 29 129 after an increase of 128 247 in the previous quarter, bringing total employment in the sector to 3 405 485.

Sithole says compared to the same quarter in 2023, employment increased by 58 739, reflecting significant job gains in public administration and defence, health and social work and other service activities.

“While public sector employment remains above pre-pandemic 2019 levels, it is increasingly under pressure from fiscal constraints and ongoing consolidation efforts.”

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Unemployment in private sector looking up

In the private sector, jobs in the formal non-agricultural sector (excluding the formal public services) increased by 119 472, fully reversing the 6 278 quarterly decline in the third quarter. Compared to the corresponding quarter in 2023, jobs in this sector increased by 132 867 to 8 273 680, underscoring strong private-sector employment gains, Sithole says.

She points out that large formal employment gains were recorded in financial intermediation, insurance, real estate and business services, reflecting 210 587 job gains in other business activities, partially offset by declines in insurance and pension funds, real estate activities and computer-related sectors.

“This was followed by a 15 097 quarterly employment gain in formal manufacturing and a 12 267 increase in formal construction. Formal net job losses were recorded in wholesale and retail trade, motor trade and hospitality, transport, storage and communication, mining and electricity, gas and water.”

In the agricultural and informal sectors, employment in agriculture decreased by 11 014 jobs compared to the third quarter but increased by 3 601 to 923 945 compared to 2023. Sithole says this decline is unsurprising given the 15.5% year-to-date contraction in agricultural GDP.

“However, the increase in the Agbiz Agribusiness Confidence Index at the end of last year and improving weather conditions suggest a potential near-term improvement.”

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Less unemployment in informal sector and households

Informal employment, a crucial source of income for many South Africans, increased by 33 893 compared to the third quarter and by 147 193 to 3 328 461 compared to 2023. Employment in private households increased by 18 446 compared to the previous quarter and by 12 248 to 1 146 271 compared to 2023.

However, Sithole says the quarterly gain was not sufficient to fully offset the 32 398 net job losses recorded in the third quarter, indicating that households remain under pressure despite low inflation and modestly reduced monetary policy restrictiveness.

“While the QLFS data shows an improvement in the unemployment rate and reasonable employment gains, including a rise in the absorption rate, the labour market remains structurally constrained amid weak growth and a persistently high youth unemployment rate.

“We are encouraged by some alleviation in energy constraints and gradually stabilising logistics networks, which should support operating conditions and growth prospects. However, more infrastructure reforms and investment, along with improved governance and service delivery at the municipal level, will be critical to sustaining growth and meaningfully boosting employment,” she says.

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Labour market expected to improve

Johannes Khosa, Busisiwe Nkonki and Nicky Weimar, economists at the Nedbank Group Economic Unit, say they expect the labour market outlook to improve modestly as structural constraints ease and cyclical forces become more favourable.

“Steady power supply and slightly smoother logistics should continue to support underlying economic activity. Steady global growth and firmer commodity prices should offer some support to exporters in the mining and manufacturing sectors.

“Agriculture should benefit from more favourable weather conditions. On top of these positives, we expect an acceleration in consumer spending, boosted by rising real incomes, subdued inflation and withdrawals from the two-pot system.”

They say given the anticipated economic recovery, corporate profitability should improve, which, together with accelerated economic reforms, should lift business confidence and encourage companies to consider expanding operations and employing more people.

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Public sector employment expected to be limited

“In contrast, fiscal consolidation will limit government employment growth.”

Khosa, Nkonki and Weimar warn that looming labour disputes and retrenchment in specific industries, particularly manufacturing and mining, could also undermine the effort to reduce unemployment.

“Over the medium- to longer-term, a meaningful reduction in the unemployment rate will only be achieved through faster labour-absorbing economic growth. We forecast GDP to grow by 1.4% in 2025 and 1.6% over the next three years. Okun’s Law suggests that a 1% decrease in unemployment will occur when the economy grows by 2% or more.”