The formal economy shed 15,000 jobs in the first quarter of 2016 including a surprise drop in permanent employees in provincial and local government, Statistics SA’s (Stats SA) quarterly employment statistics survey (QES) showed on Monday.

While the drop in private sector jobs was expected, the fall in government jobs bucks a long established trend that has seen a steadily rising number of public sector employees.

Although one quarter’s data is not enough to point to a trend, the drop in provincial and local government employment may suggest that departments are heeding Finance Minister Pravin Gordhan’s call to cut the size of the public sector in order to slash the wage bill.

The government’s wage bill, which has grown exponentially since 2008, now consumes 40% of all spending.

Getting the wage bill under control is central to the fiscal consolidation being led by the Treasury. It is one of the areas of concern raised by rating agencies, two of which have SA on a negative watch.

The formal sector shed 15,000 jobs to 9.27-million, mainly due to losses in trade, business services, mining and manufacturing.

Sectors "bleeding jobs" was consistent with the deep economic contraction recorded in the first quarter, statistician-general Pali Lehohla said.

Provincial governments lost 11,000 jobs, while local government jobs were down by 3,000. National government jobs were up by 5,000.

The number of temporary jobs in government grew, as the Electoral Commission of SA (IEC) employed 50,000 more people in preparation for the local government elections in August, the QES showed.

The majority of the jobs created by the IEC are temporary and usually fall away when elections are over.

Gordhan told the Financial Times at the weekend that government was close to announcing a series of reforms to the labour market.

He also told the newspaper that government would deliver on promises made to the ratings agencies to stabilise the economy and make structural reforms including in the highly regulated labour market, to improve the country’s growth potential.

SA’s labour laws have often been identified by employers as being too stringent and one of the reasons the country has not been able to create jobs.

The latest jobs numbers not only affirmed sluggish economic growth, but also the negative effect labour laws were having on the ability of companies to create jobs or take on additional workers, ETM Analytics economist Jana van Deventer said.

Commenting on Gordhan’s comments, Van Deventer said: "While the guidance offered by the minister on possible labour reforms might be helpful, these labour reforms will have to be quite significant to bring about meaningful change in the labour market and enable companies to have the ability to bolster job growth."

Employment fell in five of the eight industries surveyed by the QES.

Jobs were created in construction, transport, and community services industries.

The 36,000 jobs lost in trade were not surprising as temporary employment created by the sector in the fourth quarter of the year for the festive season is normally shed in the first quarter.

Mining and manufacturing shed 12,000 jobs and have been under pressure from rising operating costs, faltering demand and still-low commodity prices, resulting in huge job losses.

Mining lost jobs for the sixth consecutive quarter in the first quarter of 2016. Employment in the sector has been declining gradually, from 511,000 in the second quarter of 2013 to 455,000 in the first quarter of 2016.

Gross earnings were down in seven of the eight industries surveyed and were in line with the recorded job losses.

Earnings were R22bn lower at R523bn.

Gross earnings paid to employees in the community, social and personal services industry, which is mainly made up of public-sector jobs, declined due to "the decreases in gross earnings of local government; health and social work; extra budgetary institutions; provincial departments; and other educational institutions," Stats SA said.

 

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