Employment figures for 4Q15 released in the quarterly labour force survey (QLFS) show that the unemployment rate fell from 25.5% in the third quarter to 24.5%.

While encouraging at a headline level, much of the good news is attributed to seasonal hiring, and the unemployment rate rose by 0.2% on a year-on-year basis.

On a quarterly basis, 107,000 jobs were created in the financial and business services sector, 75,000 in the retail sector and 55,000 in the community, personal and social services sector. Job creation in the retail and financial/business services sector can largely be attributed to seasonal (holiday period) fluctuations, while the community, social and personal services is typically considered a proxy for public sector hiring. In the context of yesterday’s budget commitments to cap headcount growth in the public sector, we expect little impetus in job creation from the state which has in the past held up the overall employment rate.

The budget speech also outlined the funding constraints for large infrastructure projects which would have provided some much needed employment momentum in the mining, manufacturing and construction sectors. Manufacturing actually lost jobs in the fourth quarter on both a quarterly and annual basis while capital equipment investment from the industry remains robust. This suggests an element of labour substitution. The agriculture sector also has the potential to shed further jobs in the coming quarters given the prevailing drought conditions.

Overall, we expect unemployment levels to trend sideways to slightly higher as both the public and private sectors adjust to significantly more austere fiscal conditions.