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South Africa – Employment conditions deteriorate as election nears

12 August 2013

South African employment fell sharply during July, as the economy shed more than 37,000 jobs, making it the third worst performing month since the 2009 global financial crisis, according to the Adcorp Employment Index.

Jobs were shed in both permanent and temporary (or non-permanent) positions with job losses amounting to 26,189 and 11,559, respectively. Since January 2013, the formal sector has shed 146,638 jobs whereas the informal sector has created 42,906 jobs. Losses were observed in manufacturing, transport, construction and financial services, amounting to 18,000 job losses between them.

Loane Sharp, Adcorp’s labour economist, commented: “The labour market’s performance is likely to have a significant effect on the 2014 general election. At present, 17.6% of the national workforce is involuntarily dismissed each quarter. It is a South African strength that mobility in the labour market is high and that most of those who are dismissed find alternative work. However, the dismissal and resignation rates create a pervasive sense of insecurity and vulnerability among the country’s 13.5 million workers, which does not bode well for the ruling party’s performance in next year’s election.”

“In a high-performing labour market, the number of dismissals is relatively low as the demand for labour is relatively high, whereas the number of resignations is relatively high since job-seekers feel secure in moving from one job to another,” Sharp explains.

Since the 2009 global financial crisis, the rate of dismissals has reached 2.38 million per quarter, its highest level in the second quarter of 2013. Within the labour market cycles, two of the most important barometers of labour market performance are the number of dismissals and the number of resignations. The dismissal cycle has a distinct economic rhythm, and monetary policy could be doing more to stimulate the economy and improve the labour market’s performance.

South African Reserve Bank Governor Gill Marcus recently indicated that labour market reforms are necessary to boost employment.

“While this is undoubtedly true, Governor Marcus’ statement was presumably intended to quell the argument from some quarters that the Reserve Bank could be doing more to stimulate employment. By stating that South Africa’s unemployment problems are structural rather than cyclical, Governor Marcus must have intended to signal to detractors that monetary policy cannot, and will not, be used to stimulate job creation,” Sharp argues.

In contrast to dismissals, the resignation cycle is an important guide to the level of security job-seekers feel when moving voluntarily from one job to another. From a peak of 763,000 resignations per quarter in 2008, the resignation cycle has reached a low point of 466,000 resignations per quarter in 2013.

This suggests that those in employment are reluctant to change jobs out of fear that, in their new jobs, they would be vulnerable to dismissal.

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