The official statistics body, Statistics South Africa (StatsSA), released employment figures for the first quarter of 2019 (i.e. January to March) on Thursday.
As economists expected the figures show an an increase in unemployment rate. The official unemployment rate increased to to 27.6 percent of workers and active job seekers.
In the previous quarter the official unemployment rate was 27.1 percent. Economists had expected the decline in employment figures given the depressed economy and the adoption of a wait-and-see attitude by many businesses with respect to general election in May.
Surprisingly, when the figures from the first quarter of 2019 is compared to the first quarter of 2019, all of jobs were lost in the formal sector. A small number of jobs were created in the informal sector (35 000) and another 26 000 jobs were created in the household sector (domestic workers etc.).
By contrast 135 000 jobs were lost in the formal sector – yielding a net loss of 86 000 formal jobs in the year.
Currently 6 million South Africans are unemployed and actively seeking work. Another 3-million people seek employment but have become discouraged to the extent they had not applied for, or actively sought employment recently. When the latter are included in the estimates the unemployment rate rises to 41 percent.
The graphic illustrates the trend in the official (conservative) unemployment rate.
While there has been a gradual increase in the unemployment rate over the past decade the decline in formal employment is the biggest year-on-year job loss in recent times. Given that the decline in formal employment was not matched by similar change in the informal and household job sectors it can not be entirely attributed to general economic conditions.
South Africa exited the recession in the second half of 2018 and economic growth prospects improved as should employment levels.
However the decline in formal employment does coincide with the implementation of broad based minimum wages. While these came into effect from January 2019 they are likely to have had a more marked effect on the regulated and organised sectors of the economy – explaining why informal and household job sectors do not show marked declines.
The long term impact of the minimum wage on employment prospects still has to be explored but the latest statistics indicate the legislation may well have reduced employment prospects in entry level positions.
