South Africa’s unemployment rate climbed to a four-year high of 33.6% in the second quarter, as the government’s efforts to contain spending saw state-related jobs bleed out faster than anywhere else in the economy.
The rate rose from 32.7% in the first quarter, according to Statistics South Africa, above the median forecast of 32.6% in a Bloomberg survey of economists. The number of unemployed people rose by 345,000 to 8.5 million, while total employment fell by just 16,000 to 16.7 million.
“The headline figure is worse than it first appears, and the steady bleed points to fiscal constraint at national and municipal levels, not a private-sector cycle,” Chris Hattingh, executive director at the Centre for Risk Analysis, told the FM. Seven of the 10 industries monitored by Stats SA recorded losses, with community and social services, mining and manufacturing taking the heaviest hits, while trade and construction added workers.
The bigger driver, according to Nedbank, was a swelling pool of job-seekers: the labour force grew by 329,000 during the quarter, outpacing an already weak rate of job creation.
Youth unemployment worsened faster than the headline number. The jobless rate for the 15-to-34 cohort accelerated to 47.4%, from 45.8% in the first quarter, an increase of 264,000.
“A higher level of youth unemployment worsens the fragility of the social fabric in South Africa,” says Sanisha Packirisamy, Momentum Group economist. “With graduate unemployment remaining above 12%, this indicates a poor level of labour absorption even at a higher level of educational attainment.”
Fewer structural constraints
Johann Els, chief economist at PSG Financial Services, cautions against reading too much into one quarter, and that a longer view is needed. Cumulative job growth since the end of 2022 stands at 900,000, even in a weak economy.
“Looking forward, we see fewer structural constraints, thanks to significantly stronger private-sector involvement, that will bring us better economic growth than what we’ve had over the last 16 years,” he says, forecasting medium-term growth of about 3%, against an average of 1% over the past 16 years.
Still, FNB economist Thanda Sithole added that the strain is already showing up in big-ticket spending: subdued job growth is likely to weigh on demand for large purchases such as vehicles, even as lower fuel prices and steady financing conditions offer some relief.
South Africa has already passed the point where unemployment constrains business confidence and investment, Packirisamy warns.
“Higher levels of joblessness translate into weaker household spending, lower economic growth and lower business expansion intentions,” she adds. “A high level of unemployment also feeds into a narrower tax base, lower government revenues and more social demands on the fiscus – it’s also a key ingredient for social unrest and can raise the level of criminal activity in an economy.”
