South African Shocking Unemployment Figures

South Africa’s official unemployment rate rose to a new high in the first quarter as the construction and trade industries shed jobs.

The jobless rate rose to 32.6% from 32.5% in the three months through December, Statistics South Africa said Tuesday in a report released in the capital, Pretoria. That’s the highest number on record.

Unemployment according to the expanded definition, which includes people who were available for work but not looking for a job, rose to 43.2% from 42.6% the previous quarter. That was as the number of discouraged work seekers surged by 201,000 people in the quarter.

Unwelcome High

South Africa’s jobless is among the highest tracked by Bloomberg

Source: Statistics South Africa, Bloomberg

Persistently high unemployment poses a threat to social stability in Africa’s most-industrialized economy. It could complicate efforts to reduce fiscal deficits and slow debt growth as it may force Finance Minister Tito Mboweni to re-introduce a special Covid-19 relief grant for unemployed people that ended in April. Mboweni in February announced plans to cut spending over the next three years as he targets a primary surplus in fiscal 2024-25.

South Africa’s official unemployment rate has been above 20% for at least two decades, even though the economy expanded by 5% or more a year in the early 2000s. Analysts cite an education system that doesn’t provide adequate skills, strict labor laws that make hiring and firing onerous and apartheid-era spatial planning that make it difficult for job seekers to enter and remain in the formal workforce as part of the problem.

Restrictions to curb the spread of Covid-19 caused gross domestic product to contract 7% in 2020 and worsened joblessness as it forced some businesses to cut wages, reduce staff or shut down permanently.

“Unemployment is unlikely to return to pre-crisis levels given we don’t see real per capita output returning to pre-crisis levels,” said Peter Attard Montalto, head of capital markets research at Intellidex. “The economy would need to see trend growth well above 2.5% rather than the 1.7% we see to absorb the lost jobs.”

While South Africa’s official unemployment rate is the third-highest of 82 countries tracked by Bloomberg, some data are for different periods.

Key Points:

  • Construction lost 87,000 jobs.
  • Trade industry lost 84,000 jobs.
  • Transport lost 40,000 jobs.
  • Finance industry added 215,000 jobs.

Source: Bloomberg

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