Economy sheds jobs despite second-quarter growth

09 October 2016 - 02:04

The surprise 3.3% jump in economic growth during the second quarter of the year has proven to be a mirage for workers — 67,000 jobs were lost in the formal sector during the period, data from Statistics South Africa showed on Friday.

Mechanisation in the mining sector and cost-cutting across industries in a weak economy were likely to blame for the job losses, said statistician general Pali Lehohla, who presented the quarterly employment statistics in Pretoria.

These statistics measure changes in employment across all sectors in the formal economy, excluding agriculture, and are based on data collected from VAT - registered businesses. The quarterly labour force survey, which measures employment in the whole economy, showed the unemployment rate was 26.6% in the second quarter.

This means 5.6 million people were unemployed. The expanded unemployment rate, which includes people who have given up looking for work, was 36.4%. “The job losses that we see here [mean] the economic conditions are pushing jobs down,” Lehohla said.


He said in the mining sector, for example, job losses were out of sync with fluctuations in production. “This suggests that there is a lot of mechanisation and a substitution by capital in the mining industry. In the manufacturing industry and every other industry they are looking at how they can reduce costs,” he said.

Year on year, employment in mining and quarrying dropped by 6.5%, or 32,000 employees, in the three months to June. Quarter on quarter, 1,000 jobs were lost, making it the seventh consecutive quarter in which employment has declined.

The manufacturing sector shed 16,000 jobs in the three months to June, year on year, and 7,000 quarter on quarter. This was mainly due to jobs being shed in the food, beverages and tobacco, textiles, clothing, leather, furniture and recycling sub-sectors.

Kamilla Kaplan, an economist at Investec, said weak fundamentals on the production side of the economy, with economic growth forecast to be close to zero for the year, “does not bode well for labour market dynamics”.

Employment prospects were expected to be stagnant for the rest of the year. Kaplan said data for mining and manufacturing sector production in August, which will be published in the coming week, are expected to show continued under performance.

Mining production is forecast to contract 3.8% year on year and manufacturing production is expected to ease to 1.4% year on year from 1.9% year on year previously.


Lehohla said employment losses were recorded in all industries except electricity and construction. Electricity, gas and water supply added 1,000 employees year on year.

The construction sector grew by 7,000 people over the same period. Wholesale and retail trade, repair of motor vehicles, motor cycles and personal and household goods, and the hotel and restaurant industry added 20,000 employees year on year.

But quarter on quarter the subsector lost 4,000 jobs due mainly to attrition in the hospitality industry and motor trade. The community, social and personal services segment also experienced job losses.

In the first quarter this year, jobs in the sector peaked at 2.6 million thanks to the Independent Electoral Commission taking on masses of temporary staff ahead of the August 3 local government elections.

But in the second quarter there was a net decrease of 48,000 jobs. There was some good news on the income front.

 The quarterly employment statistics, which also reflect earnings, showed an increase of 3.7% in average monthly earnings paid to employees in the formal sector, from R17,396 in February to R18,045 in May. On an annual basis, average monthly earnings increased by 7.5%.