01 Jun 2017
Labour update: At 27.7% unemployment reaches the highest rate since 2003
At 27.7%, the unemployment rate reached the highest level since 2003 in Q1.17. The unemployment rate increased from 26.7% in 2016, and exceeded the rate of 23 - 24% during the 2008/09 recession.
The unofficial unemployment rate, which includes the discouraged, rose to 36.4% in Q1.17 from 36.2% in 2016.
In Q1.17, the number of employed individuals rose 0.9% q/q and 3.4% y/y to 16.2mn. However, the labour force expanded at a faster rate of 2.6% q/q and 4.8% y/y to 22.4mn. Consequently, the number of unemployed individuals rose 7.5% q/q and 8.6% y/y to 6.2mn.
In Q1.17 compared to Q4.16, job gains were registered in seven of the ten industries, with the largest gains in manufacturing (62 000); finance (49 000), mining (26 000) and construction (23 000). Sectors that shed jobs were agriculture (44 000), trade (15 000) and government (2 000).
In comparison to Q1.16, job gains of 152 000, 145 000 and 143 000 were observed in the finance, manufacturing and construction industries respectively. Employment in government and mining declined by 101 000 and 24 000 respectively.
Economic growth essentially stagnated in 2016 and we forecast only a modest recovery in growth towards 2.0% by 2021. As such, unemployment rates are likely to remain stubbornly high.
The IMF has recommended that “the priority to stimulate economic growth and job creation rests with structural reforms, notably in product and service markets and in the labor market”. On the latter, the IMF assessed that policy measures should “enhance flexibility in the labor market”.
The recent cabinet reshuffle and prevailing political tensions have raised concern that this will divert government’s focus from implementing the required structural reforms. This was a contributing factor to the sovereign credit rating downgrades by Fitch and S&P. S&P noted that “(w)hile the government has identified important reforms (…) delivery has been piecemeal”.
Moreover, the recent political developments and the subsequent credit rating downgrades are perceived to have heighted policy uncertainty and further undermined business confidence. This suggest that the prospects for a meaningful recovery in private sector fixed investment and employment are poor.