by Piet Coetzer

Unemployment - The hidden story

Statistics often hide the true state of affairs

JP Landman takes a look at the apparent paradox that South Africa is simultaneously experiencing rising employment and rising unemployment.
JP Landman twee.jpg

Worldwide, there are concerns about the seemingly stubborn rise in the number of the unemployed, even where there are claims of some economic growth. Often official statistical percentages and the bare figures obscure some the more complex causes of high unemployment figures. In other instances, the way statistics are represented can be misleading, as the latest official figures in both South Africa and the United States (US) prove.



This situation is fraught with social and economic dangers as it often sends erroneous signals to markets and discouraging messages to negatively affected communities.


Earlier this month, US exchange markets soared on news of what seemed to be much improved employment figures. The April employment report exceeded expectations, with 165 000 jobs created and what was regarded as a welcome drop in the unemployment rate to 7.5%.

Closer scrutiny, however, reveals a much different and more negative reality. While it is true that the number formal jobs increased, the total number of hours worked by US employees dropped sharply. The collective earnings of US workers thus also declined But there was a dark side to the report. Total hours worked fell sharply, and the total amount of money earned by U.S. workers actually declined from the month before impacting negatively on the economic health of thousands of American families.

The total number of hours worked by American dropped by 0.4%, or spread over the 135-million strong work force on average by 12 minutes.



Looked at it that way, the US effectively lost more than 335 000 job opportunities in April if workers hours would have kept steady.



The implications of this is illustrated by an analysis in MarketWatch, which stated: “Think of it this way: If companies had hired all 12 million unemployed people in April, but had cut everyone’s hours in half, the unemployment rate would have fallen to zero, but we’d be much worse off. Our paychecks would be much smaller, and the economy would contract violently.”



The USfigures, as released, also hidetwo other problems areas. Some Americans are so dejected that they are simply dropping out of the job search (and thus disappear from the statistics and the persistently high unemployment rate for young people, with figures for the 20-24 age stands at 13.1% (almost the same as last April) and at 20.4% if those who have given up looking for work, are included.



Hidden or often forgotten behind South African unemployment statistics there are also a number of complex socio-economic factors, some due to historical circumstances and others shared with much of the so-called developing world.



In his latest Investment research notefor Nedbank political analyst JP Landman takes a look at the apparent paradox that South Africa is simultaneously experiencing rising employment and rising unemployment. He notes that this is a characteristic has “been with us for a while and will probably be with us for another generation or two.”



The latest employment statistics released recently, indicate that for the year to the end of March 199 000 more people were employed than a year ago but there were also 75 000 more were unemployed.



Landman identifies three factors at work in this phenomenon:


  • The first is demographics, where the statistics indicate that between 1995 and 2013 the absorption rate of those of working age amongst the population has gone up from 39% to 41% and peaked on 45% in 2008 before the global recession set in. The trend held true for the 12 months to March 2013 with 199 000 more employed took the absorption rate from 39% to 41%. “The conclusion is unambiguous: job growth kept pace with the growth in the working-age population. In fact, job growth exceeded population growth, because the percentage employed increased from 39% to 41%. Clearly demography is not the problem,” he writes.

  • The second factor is South Africa’s massive rate of urbanisation since 1994. People living living in the rural areas under subsistence existence conditions are not economically active and are not reflected in the labour market statistics. SA’s population is now however 62% urbanised increasing the demand for jobs, which are not fully catered for even though the number employed does go up.

  • The third factor is Gender liberation combined with newly urbanised who go job hunting and now get absorbed into labour market statistics.



The short answer to the apparent paradox is therefore that there are more people who want to work due to fundamental social changes.



The only way out is to create more jobs. That 41% employed must, and will, be lifted to 65% or 70%; the levels where developed countries are today. For perspective, if we increase the percentage employed with 0.1% per year, as we did over the 12 months to March 2013, it will take 290 years to reach 70% employment. That is a bit long. If we increase the percentage by 2% over 18 years (as we have done), then it will take 261 years – also a bit long! So we are in for the long haul, which is why I said the paradox will be with us for a generation or two, at least,” Landman writes.


As many other studies, on the impact of rapid technological developmentsindicate, the gap between the rate of economic growth and the rate of job creation is widening, with the job rate falling further and further behind. There are just not short, simple and quick answers to the problem. Holistic long-term thinking, planning and programmes will be needed to come to grips with the employment challenge.


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