Threats to economic growth hinder job creation

The unemployment rate is likely to remain high thanks to rising inflation and interest rates.

With South Africa and the rest of the world facing economic challenges, businesses are finding it difficult to expand capacity and create jobs.

A recent Nedbank research shows that the outlook for the job market will remain uncertain as long as there are threats to economic growth.

The bank noted that the economy had started 2022 positively, with corporate profitability recovering, but that was short-lived as concerns about persistent high inflation and high unemployment grew.

“Conditions in the sectors that supply the export market are likely to remain subdued as global demand will be restrained by the slowdown in China’s economic growth, the impact of the Russia-Ukraine war, and tighter monetary policy. The sectors focused on local demand are still expected to expand, mainly supported by consumer spending, but the upside will be limited by rising inflation and interest rates,” the study reveals.

“This, together with slow structural and policy reforms and power shortages, will weigh on business confidence and the private sector’s willingness to expand capacity, essential for job creation. At the same time, some of the businesses affected by the flood in KZN will take time to return to full operations due to the extent of the structural damages.”

The research noted that with the lifting of the state of disaster, South Africa should see the recovery of labour-intensive industries such as hospitality and tourism.

“Public sector employment will be restricted by government caps to support necessary fiscal consolidation. The labour market will continue to expand due to new entrants into the labour market and the return of discouraged work-seekers, while employment growth will probably increase at an only moderate pace. As a result, the unemployment rate will remain structurally high in the short term. ”