South African Economy Shed 79,000 Jobs Last Quarter, Undermining Recovery
South Africa’s economy shed 79,000 jobs in the first quarter, threatening to worsen the highest unemployment rate of 62 countries tracked by Bloomberg and raising doubts about the strength of the recovery.
Employment in the formal, non-agricultural economy fell 1 percent to 8.08 million in the three months through March, after gaining a revised 0.2 percent in the fourth quarter, Pretoria- based Statistics South Africa said on its website today.
South Africa lost 870,000 jobs last year as Africa’s biggest economy fell into its first recession in 17 years, pushing up the unemployment rate to 25.2 percent. Employment has been slow to revive during the economic recovery, undermining a government pledge to cut the jobless rate to 14 percent by 2014.
“These are horrible numbers, given that the economy is already growing,” said Johan Botha, an economist at Johannesburg-based Standard Bank Group Ltd., Africa’s biggest lender. “The economy’s ability to grow jobs has been declining over time. It looks like we’re heading into a soft patch on the growth side.”
The economy expanded an annualized 4.6 percent in the first quarter, buoyed by a rebound in manufacturing and mining exports. Consumer spending, which accounts for two-thirds of demand, has remained weak even after the central bank cut its benchmark interest rate seven times to 6.5 percent since December 2008.
“We continue to believe there is room for another interest rate cut in the current cycle given the fundamental weakness in the economy,” Annabel Bishop, an economist at Investec in Johannesburg, said in a note to clients today.
The Reserve Bank will make its next interest rate decision on July 22.
Employment fell in the first quarter as construction projects related to the soccer World Cup ended.
The construction industry lost 7,000 jobs in the first quarter from the previous three months and 50,000, or 10.9 percent, compared with the same period last year, the statistics office said.
South Africa has spent 43 billion rand ($5.7 billion) to expand roads and airports, build railways and renovate stadiums for the monthlong soccer tournament, which began on June 11.
The statistics office publishes the unemployment rate in a separate survey, which includes jobs in informal industries.
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