Johannesburg - South Africa’s unemployment rate dipped to 26.6 percent of the labour force in the second quarter of the year from a record 26.7 percent in the first quarter, data from Statistics SA showed yesterday.
Statistician-General Pali Lehohla said the quarterly labour force survey showed that 5.634 million people were without jobs in the second quarter compared with 5.723 million previously.
The expanded definition of unemployment, which includes people who have stopped looking for work, rose to 36.4 percent in the second quarter, from 36.3 percent in the first quarter.
“Indications are that we are in a quite difficult economic situation,” said Lehohla.
The economy is teetering on the brink of recession after contracting 1.2 percent in the first quarter as manufacturing and mining sectors shrunk rapidly. The Reserve Bank last week said it expected 0 percent growth this year.
Stats SA said the largest quarterly employment losses were in the services, agriculture and transport sectors. It said 127 000 jobs were shed in the public administration and social services, while 44 000 were lost in agriculture due to a decline in the growing of crops and animal husbandry.
Kamilla Kaplan, an economist at Investec, said the decline in government sector employment was expected as the budget targeted the reduction of the public in civil service compensation.
Key risk area
Kaplan said the civil service wage bill had been a key risk area for the fiscal outlook, particularly as compensation was inflation-linked. “The International Monetary Fund has recommended targeted expenditure cuts, including to the bloated government wage bill, while protecting social grants and investment.”
She said labour market prospects were likely to remain poor, with the economy widely expected to stagnate this year.
Gauteng had the country’s second-highest rate of unemployment at 29.5 percent.
After softening for three consecutive months, producer inflation rose supporting views that food prices were likely to exert upward pressure on producer prices this year.
Annabel Bishop, the chief economist at Investec, said: “The extent of the upward pressure will though be mitigated somewhat by the stronger rand and it is for this reason that we have in recent months marginally flattened our producer inflation.”
Hanns Spangeberg, an analyst at NKC African Economic Research, said although PPI inflation ticked upwards last month, the latest reading saw the average for PPI inflation in the second quarter at 6.8 percent year on year, from the average of 7.6 percent year on year in the first quarter.
“Similarly, consumer price index inflation also slowed slightly in second quarter from the first three months of the year. As such, the SA Reserve Bank elected to maintain the repurchase rate at 7 percent in July, while the overall tone of the meeting’s minutes was considerably less hawkish than in previous meetings. Nevertheless, we expect price pressures to intensify during the second half of 2016, with the (Reserve Bank) hiking at least once this year in an effort to curb inflationary expectations.”
* With additional reporting by Reuters
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