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Unemployment on the retreat

| Economic factors

South Africa’s unemployment rate in the fourth quarter of last year retreated from its highest in 13 years, as key sectors hired more workers in a further sign of recovery in an economy that flirted with recession in 2016.

Unemployment stood at 26.5 percent of the labour force in the fourth quarter, down from 27.1 percent in the third quarter, data from Statistics SA showed yesterday.

In its quarterly labour force survey, which polls households, the agency said this amounted to 5.781million people without jobs in the fourth quarter compared with 5.873million previously.

It said the growth in employment was mainly driven by the services industry and the transport and manufacturing sectors.

The currency responded by firming more than 1 percent to its strongest in three months against the dollar, having already gained earlier as global risk sentiment improved following the resignation of the US national security adviser.

Nedbank economist Johannes Khosa said the South African data showed that economic conditions were improving, but warned that the decrease in joblessness was coming off a very low base and that the improvement would be difficult to sustain.

“Remember the numbers are not seasonally adjusted and you find that firms tend to employ more people in the fourth quarter, so it’s hard to read too much into the figures,” Khosa said.

South Africa’s economy is set to have expanded by only 0.4 percent in 2016, according to the Reserve Bank, which also estimates growth of 1.1 percent for 2017, well short of the government’s target of 5 percent annual growth.

Read also: Unemployment eases in last quarter

The expanded definition of unemployment, which includes people who have stopped looking for work, also decreased to 35.6 percent in the fourth quarter, from 36.3 percent in the previous quarter.

Kamilla Kaplan, an economist at Investec, said the pace of job creation falls short of the target of the National Development Plan of 611000 new jobs per year, to bring the unemployment rate down to 4percent by 2020 and to 6percent by 2030.

“This rate of job creation is premised on 5percent per annum economic growth.”

Kaplan said economic growth essentially stagnated in 2016 and she forecast only a modest recovery in growth towards 2 percent by 2020.

As such, unemployment rates are likely to remain stubbornly high.

Eight of the 10 industries reported increased employment levels, with the largest gains registered in government, transport, manufacturing and agriculture.

“The government has been the largest employer since the 2008/09 recession, but fiscal constraints mean the government is no longer afforded the scope to continue expanding the civil service,” Kaplan said. “The onus of job creation therefore falls on the private sector.”

Economists.dotcoza economist Mike Schussler said although it was too early to say whether the latest figures signal a change in trend, the improved rainfall in the northern parts of the country, together with recovering commodity prices, suggested that the primary economy’s prospects were faring better.

“This sentiment is augmented by other industry statistics, such as the January Manufacturing Purchasing Managers’ Index and new car sales,” Schussler said.

Additional reporting by Reuters.

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