Economists call for structural changes as unemployment climbs to 29%

Turning the tide on the weak economy is not enough: structural changes are required in order to accelerate employment creation and reduce the unemployment rate.

This was the word from economists following the release of Statistics South Africa’s second quarterly labour force survey.

The country continues to face economic hardships, with the unemployment rate shooting up to 29% in the second quarter of 2019, the highest that it’s been since the 2008 recession.

During the first quarter of the year, unemployment was listed as 27.6%.

The highest level of unemployment was recorded in March 2003, when it was 29.3%.

This means that 6.7 million people between the ages of 15 and 64 of the labour force are now unemployed.

According to StatsSA, the Eastern Cape has recorded the highest unemployment rate at 35.4%, with private households, the transport and mining sectors recording the biggest declines in unemployment.

More women are unemployed than men, with the unemployment rate for females currently sitting at 31.3%.

Although the participation in the workforce increased by one percentage point to 59.8%, the absorption rate into the workforce decreased by 0.2 of a percentage point to 42.4%.

The survey indicates that youth unemployment is higher irrespective of the level of education, with youth unemployment standing at 32.3%.

Although there was some increase in employment between the two quarters, largely in the informal sector, the biggest impact on the unemployment rate calculation was a significant decline in the number of discouraged workseekers, Lullu Krugel, PwC Strategy& chief economist for Africa, and Dr Christie Viljoen, PwC Strategy& economist pointed out.

“These people are recorded as being unable to find work requiring their skills or who have lost hope of finding any kind of work.

“The 248 000 decline in the discouraged workers count is certainly not due to a spike in the availability of jobs – not in South Africa’s current economic situation. It could be a statistical anomaly or, more likely, a sign of desperation among those who previously gave up on finding a job.”

Formal employment declined by 49 000 as job losses in mining, transport, finance and private households during 2019.

From a geographic perspective, formal employment declined in the Western Cape, Northern Cape, North West and Gauteng, with gains in the other five provinces.

PwC’s Strategy& Economics estimated that total formal sector employment declined by 1.4% in 2019 Q2 compared with a year earlier, while the number of unemployed increased by 9.4% over the same period.

Krugel and Viljoen reiterated the call for the urgent establishment of a Presidential Jobs Committee, as discussed during the Presidential Jobs Summit in October 2018.

The committee needed to receive quarterly progress reports on the implementation of the action plans.

“Tangible actions from such a high-level committee are now drastically needed,” they said.

“Turning the tide on the weak economy is not enough: structural changes are required in order to accelerate employment creation and reduce the unemployment rate. These include changes to the quality of governance, the level of competition in many industries, labour market flexibility, and the cost of doing business. Reforms in these areas could lift business confidence and private investment, allowing economic growth to follow.