‘2Q18 Unemployment worse than we had feared’

 

Jason Muscat

By  Jason Muscat, Senior Economic Analyst at FNB.

The unemployment rate  in the second quarter deteriorated markedly relative to our expectations, climbing to 27.2% from 26.7 in the first quarter as the economy shed 90,000 jobs. This was despite the labour force growing by only 12,000 people in the quarter. The ranks of the unemployed swelled by 102,000 to just less than 6.1 million people while the number of discouraged work-seekers increased by just under 77,000. The expanded definition of unemployment, which includes discouraged work-seekers rose from 36.7% in 1Q18 to 37.2% in 2Q18.

The manufacturing, social, community and personal services, and wholesale and retail trade sectors accounted for the bulk of the job losses, with 105,000 (-5.7% q/q), 93,000 (-2.5% q/q) and 57,000 (-1.7% q/q) jobs lost respectively.

The agriculture sector lost just over 3,000 jobs in the quarter, but has created 8,000 jobs from the same time last year, reflective of the improved farming conditions and the cessation of the drought.

Contrary to our expectations, the struggling mining sector added 38,000 jobs in the quarter while the equally embattled construction sector added 45,000 jobs. The transport and household sectors offset the losses by a further 75,000 jobs, but the financial, real-estate and business services sector saw 3,000 less roles.

Perhaps the biggest surprise came from the electricity, gas and water sector (utilities), which added 18,000 jobs, hiking headcount by 12.2% q/q. In the context of lower energy demand and production, and a soaring wage bill, this holds significant risk not only for the utilities’ finances, but for fiscal consolidation. With the country’s GDP growth forecast being revised lower, and still depressed business confidence, it is unlikely that there will be any real improvement in the unemployment rate over the medium term.

 



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