South Africa’s formal sector shed a staggering 161,000 jobs between the second quarters of last year and this year, indicating how tough economic conditions are starting to bite.
Formal jobs are important as they usually carry benefits and make a sustained inroad into unemployment.
The sector also employs more people, so if jobs are lost there, it means SA’s 25 percent unemployment rate will persist for longer.
In the second quarter of this year 1,000 jobs were lost when the economy contracted 1.3 percent, Statistics SA’s quarterly employment statistics survey showed on Tuesday.
“These job losses simply mean that our targets in the National Development Plan to reduce unemployment to 14% by 2020 are becoming more difficult to achieve,” Nedbank economist Isaac Matshego said.
But Stanlib chief economist Kevin Lings said the figures should be viewed with caution. They were “heavily distorted” by the fact that the government increased employment by 100,000 temporary jobs in the second quarter of last year due to elections in May.
Mr Lings said, however, that the lack of job creation in SA could lead to further social tension and discontent. A sustained decline in formal sector employment would push SA into a protracted recession, he warned.
Investec economist Kamilla Kaplan said the large number of resignations by public servants due to uncertainty over pension reforms could also have affected the numbers.
But jobs were also shed in manufacturing, transport, business services and construction.
While most sectors were likely affected by rising input costs and low commodity prices, those in business services may have been hit by new labour broking regulations.
Research had shown that half of the workers employed through labour brokers lost their jobs, while a far smaller portion got permanent jobs after amendments to the Labour Relations Act restricted the employment of temporary workers.
Formal sector jobs are likely to remain under pressure as the government will not hire as many people as it has in the past as it tries to curb its wage bill.
Finance Minister Nhlanhla Nene’s medium-term budget policy statement next month is expected to show the effect of the government’s 7 percent wage settlement with public servants.
Economic growth has been slowing and business confidence is weak — factors that indicate the private sector will not create jobs either.
If people are without jobs, they do not spend which negatively affects spending and lowers economic growth prospects.
The economy was not strong enough to support a significant increase in employment, Mr Matshego said.
“We have already received news of some major corporates in export-dependent sectors planning to reduce their staff numbers because of weak commodity prices, slowing demand in China, and local rising costs,” he said.
Gross earnings in the formal sector, however, rose between the first and second quarters.
