Latest unemployment rate better than expected but still too high

The latest unemployment rate came in better than expected at 32.9% for the third quarter on Tuesday, dropping for the third time in a row, but still remains above pre-pandemic levels and unsustainably high.

Employment increased in manufacturing, trade, construction, transport and community and social services, but jobs were lost in the finance, private household, mining and agricultural industries, according to Statistics SA’s latest Quarterly Labour Force Survey (QLFS).

The economic research group Oxford Economics Africa says although South Africa’s unemployment rate is decreasing, it still has to reach pre-pandemic levels of about 30%, after peaking at 35.3% in the fourth quarter of 2021.

“The gravity of South Africa’s unemployment crisis is highlighted by its high youth unemployment rate. Young people between the ages of 15 and 24 recorded the highest unemployment rate of 59.6% and those between the ages of 25 and 34 recorded an unemployment rate of 40.5% in the third quarter.”

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Total employment increased

Total employment increased by 10.4% or 1.5 million people compared to the third quarter of 2021, while the number of unemployed people increased by 1.1% or 82,000 individuals. The country’s non-economically active population fell by 5.5% or 988,000 individuals compared to the third quarter of 2021.

“The latest jobs report offers some good news but does not detract from South Africa’s sky-high unemployment rate. The unemployment rate has consistently remained above 20% for more than two decades now,” the group says.

Adriaan Pask, CIO at PSG Wealth, says the decline in the unemployment rate 32.9% in the third quarter from 33.9% in the second quarter was also below market forecasts of 33.4%. “This marks the lowest unemployment rate in six quarters, as the number of unemployed people declined by 269 000 to 7.725 million, while employment rose by 204 000 to 15.765 million.”

Manufacturing added 123 000 jobs, while trade added 82 000 jobs, construction 46 000 and transport 33 000, while the finance industry lost 80 000 jobs, private households 36 000, mining 1 000 and agriculture also 1 000.

He also noted that the expanded definition of unemployment, including people who stopped looking for work, fell to 43.1% in the third quarter, down from 44.1% in the previous quarter. “The decrease in unemployment is a positive development, given the current tough economic backdrop.”

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What can be done about unemployment?

However, Pask says, to ensure an upward trend in employment, both the private and public sectors must accelerate the implementation of structural and pro-business reforms to unlock investment, reduce costs and increase competitiveness and growth, all of which will go a long way in creating sustainable employment.

“The decrease is also in line with our previous comment that, although the pandemic lasted far longer than anticipated, we expected the employment situation to stabilise at pre-pandemic levels this year, as vaccination rates rise and more workers return to the labour market.

The working-age population increased by 144 000 on a quarterly basis, while total employed people increased by 204 000 compared the second quarter to reach 15.8 million, while the number of unemployed people dropped by 269 000 compared to the second quarter to 7.7 million.

According to the expanded definition of unemployment, the rate also decreased by 1.0 percentage point to reach 43.1% most recently. South Africa now has 3.5 million discouraged job seekers and 16.8 million people who are not economically active due to other reasons than being discourage from looking for a job.

The labour force participation rate was 0.3 percentage points lower compared to the second quarter at 58.3%, compared to pre-pandemic levels of about 60%. The formal sector recorded 235 000 job increases in the third quarter, relative to 6 000 for the informal sector.