Good news about South Africa’s unemployment rate – but there’s a catch

In the third quarter of 2024, South Africa’s unemployment rate saw some relief, with nearly 300,000 new jobs created. However, the real number of unemployed South Africans remains higher than the numbers suggest.

According to Stats SA, in Q3 2024, the number of employed persons in South Africa increased by 294,000 to 16.9 million. The number of unemployed persons decreased by 373,000 to 8 million.

The number of people employed in the formal sector increased by 122,000 during the quarter, and employment in the informal sector increased by 165,000. 

The largest increases in employment were recorded in community and social services at 194,000, followed by construction at 176,000 and trade at 109,000. 

Decreases in employment were recorded in the finance sector at 189,000, private households at 32,000, and manufacturing at 20,000. The transport sector also saw a notable decrease of 18,000.

According to Nedbank economist Isaac Matshego, who spoke on The Money Show with Stephen Grootes, while this increase is encouraging, it is not significant. 

Matshego explained that most new jobs were created in the informal, non-agricultural sector, which is encouraging. 

This increase is partly due to the respite in load-shedding and the more stable electricity supply from Eskom, particularly in the mining sector. 

This has been very positive for the mining sector, especially when combined with the rebound in platinum prices.

“There’s a bit of a turnaround in mining output and that has helped to recover some of the jobs that were lost, particularly in 2023,” he said.

However, there was also an increase in the number of “discouraged workers”. The number of discouraged work-seekers grew by 160,000, an increase of 5%.

When these people are included in the unemployment rate, it goes from 8 million to 12.2 million people. 

The number of people who were not economically active for reasons other than discouragement increased by 54,000, going up by 0.4% between the second quarter and third quarter of 2024. 

This led to an increase of 214,000 in the number of the not economically active population to 16.5 million.

“When we go dig deeper into the numbers, we see that about 160,000 people stopped looking for jobs,” Matshego said. 

“And with those people, the unemployment rate would have been about half a percentage point higher than what was supported.”

South Africa’s youth, aged 15 to 34, remain particularly vulnerable to the country’s unemployment crisis, although there are some green shoots.

In the third quarter of 2024, the total number of unemployed youth decreased by 171,000 to 4.8 million, while employed youth recorded an increase of 66,000 to 5.8 million.

As a result, the youth unemployment rate decreased from 46.6% in the previous quarter to 45.5% in the third quarter of 2024.

Going into the fourth quarter, some new jobs may be created. However, their longevity is still uncertain. 

With the holiday season approaching, some temporary jobs typically open up, especially in retail, which created a slight employment boost. 

However, Matshego explained that the stability of the electricity grid will be essential to sustain this activity in sectors like services, which often provide many of these seasonal roles. 

Heading into the new year, many of these seasonal jobs may disappear, and with an estimated 700,000 new job seekers entering the market – mainly recent graduates – there will be more pressure on the job market. 

“We still have a long way to go in creating the number of jobs that we really need as an economy to address our socio-economic challenges,” Matshego said.

Apart from Eskom’s improved electricity supply, the formation of the GNU has also given a boost to the economy.

Matshego explained that South Africa has had a difficult financial period which has spanned over a decade. 

While the sentiment around the formation of the GNU is still new, it has helped stabilise the economy and businesses in particular. 

“And now what we’re looking forward to is a pick up in business investment,” he said.

Before the elections, there was a lot of uncertainty around the direction that policies would take, but the formation of the GNU has helped revive business confidence since.

“The GNU has helped to revive that confidence because the GNU has continued with the prudent policies that are focused on infrastructure investment, on improving the business environment, on sorting out the SOEs as they dominate the network industries,” he said.

However, he emphasised that tangible change will require concrete actions. Looking ahead, the potential for lower interest rates could encourage investment and further job creation, but the exact number of cuts is uncertain, Matshego noted.

The outcome might be influenced by global policy changes, such as inflationary policies, which will likely come from the US now that Donald Trump has been elected president.