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Unemployment rate to remain high this year, Nedbank warns

Unemployed persons sitting on a kerb

Photo by Reuters

20th February 2024

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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Financial services firm Nedbank expects employment growth to soften this year, before picking up more convincingly next year.

“The unemployment rate will, therefore, remain high,” the bank said on February 20.

This follows after Statistics South Africa reported a 0.2 percentage point increase in the unemployment rate to 32.1% in the fourth quarter of 2023, compared with 31.9% in the third quarter.

“The unfavourable economic environment clouds employment prospects. The country’s crippling structural constraints, notably power outages and transport bottlenecks, will continue to undermine sales and elevate operating costs, squeezing private sector profits,” Nedbank said.

“Fading profits will force firms to cut costs, which could involve retrenchments. The platinum mining industry appears to have reached this point, with several companies announcing large-scale retrenchments over the next year,” it said.

Given the country’s structural issues, still subdued global demand and low commodity prices, employment in agriculture, mining and manufacturing will likely decline further this year, Nedbank added.

Further, employment growth in most other sectors, including services, will likely stagnate, but not necessarily reverse course.

Although domestic demand is fading, with consumers under considerable financial strain, the cycle should turn later this year as inflation recedes further and interest rates start to decline, Nedbank said.

Further, a decline in job creation in the final quarter of 2023 drove the unemployment rate higher, it said.

The increase was driven by lower employment and a larger labour force. Employment declined by 22 000, while the labour force increased by 25 000. Consequently, the number of unemployed increased by 46 000, the bank said.

“Concerningly, but not surprisingly, the job losses were driven by the formal sector, which shed 128 000 jobs, offsetting the 124 000 jobs created in the informal sector during the quarter.”

However, the number of discouraged workers declined by a further 107 000, as less severe power disruptions and lower transport costs likely enabled more individuals to actively seek employment, Nedbank noted.

“Total employment continues to trend above pre-pandemic levels. However, the unemployment rate remains above the pre-pandemic rate as employment is not growing fast enough to absorb both new entrants into the labour market, the unemployed and the many discouraged workers,” the bank highlighted.

Jobs were shed in five of the 10 industries tracked in the report.

“Interestingly, the mining sector added 37 000 jobs despite weak global demand, soft commodity prices, and persistent structural constraints,” the bank noted.

A total of 789 000 jobs, or 4.9%, were created in the fourth quarter of 2023 compared with the same period in 2022, driven mainly by higher employment in the finance, community and social services, domestic trade, and construction sectors, it added.

MOTOR INDUSTRY STAFF
Unemployment in South Africa rose again in the fourth quarter of 2023, as trade union Motor Industry Staff Association (Misa) had predicted in November when it had warned of a decline in employment during the quarter.

MISA repeated its plea to the South African Reserve Bank (SARB) Monetary Committee to start cutting interest rates at the next meeting on March 27.

“Persistent load shedding, increasing fuel prices and the high interest rates resulted in 22 000 workers losing their jobs in the last quarter of 2023,” said MISA Operations CEO Martlé Keyter.

“MISA believes the cutting of interest rates is the only way to stimulate the economy and to prevent further job losses.

“The retail motor industry is suffering. In December 2023, the new vehicle market registered its fifth consecutive month of year-on-year decline,” she said.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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