SA employment goes up!

Given growth forecasts, more jobs are likely to be created in South Africa in the coming months. Labour statistics released by Statistics SA show that 83,000 new jobs were created in the non-agricultural economy in the second quarter, and the economy is expected to grow by 2.8% in 2004 and 3.1% in 2005, compared with 1.9% in 2003. Mike Schüssler, senior economist at T-Sec

Presenter: Lindsay Williams, Classic Business Day
On the line: Mike Schussler, T-Sec

LINDSAY WILLIAMS: Can you tell us about the numbers?

MIKE SCHUSSLER: Well, the numbers came in surprisingly strong. If you look at the labour force survey - we created around 360 000 jobs in the last six months up to March, which is... in the broad economy - 16 000 jobs a month - that then includes the informal economy, and the agricultural economy. In the survey of employment and earnings - which goes up to June - a quarterly figure that only covers the non-agricultural formal economy, we’re creating 27 500 jobs. I know the news is different that we read every day - about people being retrenched and so forth - but somewhere, we seem to be creating a lot of jobs. And ironically enough, it’s actually in mining.

LINDSAY WILLIAMS: Where have the big gains come - you mention mining - is that the leader?

MIKE SCHUSSLER: Mining is certainly the leader... Where one would have expected it now, at the moment we are also seeing in the retail and wholesale trade... we’re also seeing business services... financial services - broadly speaking - also showing good growth. Overall, I think we’re looking at a broad employment increase, and it’s come... finally... it has started to come according to the figures from Statistics SA.

LINDSAY WILLIAMS: So, the jobless recovery is now over?

MIKE SCHUSSLER: Well, it seems to have turned around - in the last few quarters. The main driving force seems to be lower interest rates. I think that people have, all of a sudden, decided it is now good time to expand. We certainly knew that the economy was expanding, from the GDP figures - we’ve had 19 consecutive quarters of growth. Now, in the last two or three quarters, we seem to be adding jobs. That is what South Africans have waited for - for a long, long time.

LINDSAY WILLIAMS: Indeed. We are coming off a low base, let's face it. But, do you think this trend - that just emerged from these statistics, today - can be maintained?

MIKE SCHUSSLER: I believe the trend can be maintained. I’m not quite sure if we’ll maintain it quite as strongly, but certainly I think the trend can be maintained - why it can be maintained, is that the average cost of a job only rose 5.6% on a year-ago basis. And that’s actually very good news because that means it’s within the inflation target, and that indicates that employment is not going to be the bottleneck at the moment that it could potentially be. It also means that interest rates can stay low for longer, helping us to in fact create more jobs as the economy expands.

LINDSAY WILLIAMS: What other effects will there be - apart from the pride of the person having a job after, in many cases, long-term unemployment? What about the actual economy itself? Looking through your notes... it says the GDP growth rate could be up to 4.5% next year, if this trend continues.

MIKE SCHUSSLER: Absolutely. If you’re adding 3.1% more new jobs in the formal sector - on a year ago basis - and that’s the highest number we’ve had since March 1982 - then certainly that’s going to help the retail sector, the construction sector, the engineering sector, the finance sector. All the local concentrated - or the domestic concentrated sectors - are certainly going to expand because of that, and that should be a big boost for GDP growth. If your interest rates underneath this scenario stay low, I cannot see any reason for the economy not expanding at 4.5% or so next year, under these sort of circumstances. Certainly I think it might even expand the boom in the property market for a while to come, because if you’re creating 27 500 new jobs in the formal sector - those are the people who can approach the bank for a loan, a mortgage bond, after a while. I think that certainly points to a growing property sector. It points to growing retail sales. It’s certainly a very, very big boom for this economy - and we’ve been waiting for it for more than 20 years.

LINDSAY WILLIAMS: The retail sector - that rings some alarm bells with me... If we were in the United States now, and a surprise jobs figure came out - all the doom and gloom merchants would be saying: "Hold on, this is inflationary - interest rates must go up" - and the bond market would fall... the stock market would probably fall as well. Is it potentially inflationary?

MIKE SCHUSSLER: You’re right, but I’m pointing out that we still have a high unemployment rate... it has dropped. But it’s 27.8% - that’s high in any world terms, and it means that we still have a lot of excess labour - so that means we’ve got spare capacity, that shouldn’t be inflationary. The pay increases that people have got on average are 5.6%. That’s below the upper limits of inflation target - plus, there’s always a bit of productivity that you can bring into play there as well. So that shouldn’t be inflationary. I think, at the moment, we’ve still got people with graduate skills, and technical skills - out there looking for employment. So, for the next while - I don’t think it’s going to be an inflationary problem whatsoever. If this was the USA I think this sort of figure would have boosted the stock market beyond belief - to turn the tables around. I think at the moment we don’t look at our employment figures... maybe because we don’t trust them that much. I think they are starting to indicate a turn-around of trends - where we’ve always been taking people out of the workforce - now we’re actually creating jobs. That trend, I think, has been entrenched from the start of that turnaround we saw about four quarters ago, and we’re starting - in the last two quarters - to see a big acceleration in that trend of jobs being created. I don’t think we should argue whether the trend has actually started turning around.

LINDSAY WILLIAMS: I’ve interviewed a few economists from a few unions recently, and they say: "We’re going to lobby until this rand weakens, because it’s losing jobs in the mining sector". You’re telling us that the mining sector has created jobs - so what do I say to these economists?

MIKE SCHUSSLER: What we’ve got to look at is Statistics SA has indicated that the mining sector picked up 9.5% more people over the last year. Now, it does sound slightly unbelievable - and I think that level gets me worried - but what’s also clear is that other sectors in mining are expanding, other than gold, such as platinum and coal, and so forth, are probably creating the jobs - whereas the gold mines are probably still losing jobs. Gold has... for twenty years, every year it has come down in significance in the South African economy, whereas things like platinum are now probably as important as gold, and are probably going to be more important than gold - in the future. We’re probably seeing that effect - plus the effect of motor vehicle manufacturing, and the components sector - also picking up. With the domestic economy having low interest rates, we’re seeing new employment creation in the retail sector. One keeps on seeing new retail buildings. One wonders where all the people come from to support them. But, they seem to be going up and somehow surviving, and that means that people are having jobs created in that sector. The wholesale sector as well... the distribution sector is a bit disappointing. The surprise to me, was an actual decline in jobs in the construction sector, when all around me... I see construction all over. So, certainly, the figures are not perfect - but I think the indications are that we have had a major turn-around in the employment trends in South Africa over the last year, and I think people should start taking note of that.

LINDSAY WILLIAMS: Well done Mike! You sound very enthusiastic. Thanks for bringing us that good news. That’s Mike Schüssler, the T-Sec economist talking about the jobs data which is very encouraging.