Conditions in South Africa’s labour market are poised for a gradual improvement by 2025, driven by the stabilisation of electricity supply and an optimistic outlook for economic growth, which could boost job creation, though the agricultural sector lags behind.
This comes after the official rate of unemployment eased slightly in the three months to the end of December buoyed by increasing jobs in the finance and manufacturing sectors.
Data from Statistics South Africa (Stats SA) on Tuesday showed that the official unemployment rate fell by 0.2 of a percentage from 32.1% in the third quarter to 31.9% in the fourth quarter of 2024, marking the lowest jobless rate since the third quarter of 2023.
According to the Quarterly Labour Force Survey (QLFS), there was an increase of 132 000 to 17.1 million in the number of employed persons following an increase of 294 000 in the previous quarter, while there was a decrease of 20 000 in the number of unemployed persons to 8.0 million.
This resulted in an increase of 112 000 (up by 0.4%) in the labour force during the same period.
However, the expanded unemployment rate in the fourth quarter of 2024 remained unchanged at 41.9% when compared with the third quarter of 2024.
Thanda Sithole, FNB senior economist, said while the fourth quarter QLFS data showed an improvement in the unemployment rate and reasonable employment gains, including a rise in the absorption rate, the labour market remained structurally constrained amid weak growth and a persistently high youth unemployment rate.
“We are encouraged by some alleviation in energy constraints and gradually stabilising logistics networks, which should support operating conditions and growth prospects,” Sithole said.
“However, more infrastructure reforms and investment, along with improved governance and service delivery at the municipal level, will be critical to sustaining growth and meaningfully boosting employment.”
According to Stats SA, both the formal and informal sectors employed more people, with the boost coming from stronger demand, compounded by seasonal factors as firms tend to hire more temporary staff during the festive season.
The sectoral breakdown shows that finance was the largest contributor to the increase in employment over the quarter, adding 232 000 jobs during the quarter.
Manufacturing, private households, and transport also contributed, adding 40 700, 18 000 and 17 000 jobs, respectively.
These offset sharp declines in employment by community and social services, domestic trade, construction, and mining.
Employment in agriculture fell by 11 000 during the quarter but increased by 3 601 year-on-year to 923 945, given the 15.5% year-to-date contraction in agricultural GDP.
On a year-on-year basis, a total of 355 000 jobs were created, driven by manufacturing, domestic trade, community and social services and construction. In sharp contrast, employment in finance and utilities were lower than a year ago.
However, the number of discouraged work-seekers increased by 111 000 (up by 3.3%), and the number of persons who were not economically active for reasons other than discouragement decreased by 93 000 (down by 0.7%) between the third quarter and fourth quarter of 2024.
This led to an increase of 18 000 in the number of the not economically active population to 16.5 million.
Nedbank economist, Johannes (Matimba) Khosa, said they were expecting the labour market outlook to improve modestly as structural constraints ease and cyclical forces become more favourable.
Khosa said steady power supply and slightly smoother logistics should continue to support underlying economic activity. Steady global growth and firmer commodity prices should offer some support to exporters in the mining and manufacturing sectors.
“Agriculture should benefit from more favourable weather conditions. On top of these positives, we expect an acceleration in consumer spending, boosted by rising real incomes, subdued inflation and withdrawals from the two-pot system.
“Given the anticipated economic recovery, corporate profitability should improve, which, together with accelerated economic reforms, should lift business confidence and encourage companies to consider expanding operations and employing more people.
“Over the medium- to longer-term, a meaningful reduction in the unemployment rate will only be achieved through faster labour-absorbing economic growth.”