Financial services provider Nedbank says it expects the labour market outlook to improve modestly going forward as structural constraints ease and cyclical forces become more favourable.

Commenting on the slight improvement in the unemployment rate to 31.9% for the fourth quarter of 2024, from 32.1% in the third quarter, Nedbank notes that steady power supply and slightly smoother logistics should continue to support underlying economic activity.

“Steady global growth and firmer commodity prices should offer some support to exporters in the mining and manufacturing sectors. Agriculture should benefit from more favourable weather conditions,” it adds.

Further, Nedbank expects an acceleration in consumer spending, boosted by rising real incomes, subdued inflation and withdrawals from the two-pot system.

"Given the anticipated economic recovery, corporate profitability should improve, which, together with accelerated economic reforms, should lift business confidence and encourage companies to consider expanding operations and employing more people," the bank's economics unit states.

However, in contrast, fiscal consolidation will limit government employment growth. Looming labour disputes and retrenchment in specific industries, particularly manufacturing and mining, could also undermine the effort to reduce unemployment, Nedbank warns.

Over the medium to longer term, a meaningful reduction in the unemployment rate will only be achieved through faster labour-absorbing economic growth, it asserts, noting that Okun’s Law suggests that a 1% decrease in unemployment will occur when the economy grows by 2% or more.

Nedbank is forecasting GDP growth for South Africa of 1.4% this year and 1.6% for each of the three years thereafter.

STATISTICS
Statistics South Africa's data shows that South Africa added 132 000 to the employed persons figure of 17.1-million during the fourth quarter of 2024, while the number of unemployed persons decreased by 20 000 to eight-million.

This resulted in an increase of 112 000 in the labour force.

Discouraged work-seekers increased by 111 000, up by 3.3 percentage points, and the number of persons who were not economically active for reasons other than discouragement decreased by 93 000, down by 0.7 percentage points, between the third quarter and fourth quarter of 2024.

This led to an increase of 18 000 in the number of the not economically active population to 16.5-million.

The expanded unemployment rate for the fourth quarter remained unchanged at 41.9%.

The youth, aged 15 to 34 years, remain vulnerable in the labour market, but the unemployment rate among the youth decreased to 44.6% in the fourth quarter, from 45.5% in the third quarter.