Big drop in construction jobs fuel formal employment losses

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Statistics South Africa (Stats SA) reported on May 14th that South Africa’s unemployment rate increased from 27.1% of the labour force in the fourth quarter of 2018 to 27.6% during the first quarter of 2019.

A decline in employment numbers as well as an increase in the labour force brought the unemployment rate precariously close to the 15-year level of 27.7% seen in several quarters during 2017.

Given up on finding employment

Some 6.2 million job-seeking South Africans are now unemployed, with another nearly 3 million discouraged workers having given up on finding employment.

Source: Stats SA

Formal sector employment declined by 126,000 in 2019 Q1 to 11.2 million, declining by 1.1% quarter-on-quarter (q-o-q) and 1.1% year-on-year (y-o-y). While there is some seasonality in this decline – taking into account temporary workers employed over the summer holidays – the magnitude of formal job losses was also a symptom of a weak economy.

In the wake of mining and manufacturing production data released by Stats SA last week, several economists have warned that economic activity could have contracted during the first quarter – official gross domestic product (GDP) data is due in the first week of June.

Construction activities

From a sectoral perspective, employment declined in 6 out of 10 sectors. Of greatest concern is construction activities that experienced a 142,000 plunge in employment – a drop of 9.6% q-o-q and 6.4% q-o-q.

The construction industry has recently been hit by a slew of business rescue applications from major companies. This, in turn, is associated with a slump in business confidence and pressure on state finances, amongst other factors. The FNB/BER Building Confidence Index was near its lowest level in 8 years during 2019 Q1 due to an intensification of weak demand conditions.

Employment also declined in 2019 Q1 in agriculture, mining, finance, community and social services, and private households, compared to the previous quarter. From an occupational perspective, the employment of elementary, craft and other related trades fell by 145,000 jobs during the first quarter, largely as a result of the drop in construction work.

From a geographic perspective, the job losses were seen in all 9 provinces. On a positive note, employment increased in manufacturing, utilities, trade and transport, though most of the net gains were seen amongst skilled workers.

Structural changes required

South Africa’s economic malaise is weighing heavily on the country’s ability to create employment. The latest Stats SA report indicates that unemployment under the expanded definition – i.e. including people who have given up on finding a job – reached 38% of the labour force in the most recent quarter.

There is significant pressure on President Cyril Ramaphosa to structure a new Cabinet that utilises the best politicians to tackle South Africa’s employment challenge.

However, 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.


Christie Viljoen | Economist | PwC’s Strategy& | mail me |


 

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