South Africa’s unemployment rate fell to 24% of its labour force in the fourth quarter of 2010, from 25,3% in the third quarter, with the number of unemployed people decreasing by 259 000 people, said a report released on Tuesday.

Further, the Statistics South Africa (Stats SA) labour survey showed a 2,1% decrease, or 89 000 less people being unemployed year on year, leaving about 4,1-million people unemployed.

However, economists warned that, while the numbers appeared encouraging, the interpretation thereof was somewhat of a “mixed bag.”

Econometrix chief economist Azar Jamine said that a large proportion of the decrease in unemployment numbers resulted from a record 12,5%, or 117 000 people being discouraged from looking for employment opportunities in the country.

Over the past year alone, 440 000 people were counted as discouraged work seekers, disqualifying them from South Africa’s official labour force.

“We are seeing a lot more people that would previously have been classified as unemployed, being shifted into the not economically active category as definitions keep on changing,” said chief economist Mike Schussler.

He pointed out that, while South Africa’s adult population, or people between 15 and 64, increased by about 504 000 people, its labour force, or those that want to be employed, decreased with 207 000 people. “That means that South Africa is sitting with 711 000 not economically active people over the last year.”

Schussler noted that a more accurate indicator to consider in such a survey would be the country’s labour absorption rate, which only increased from 40,5% to 40,8%.

Investec’s Kgotso Radira noted that the low absorption rate was probably indicative of the economy’s inability to create jobs.

Nevertheless, the country still increased employment growth with 157 000 jobs during the fourth quarter of 2010, compared with the previous quarter.

Schussler said that, while this was a positive progression, it could mostly be passed off as seasonal or unsustainable, as a large percentage of it was generated through government initiatives.

Jamine agreed, saying that while a drive in government employment would be good for the quality of life of some, it could not be sustained over the longer term.

“Interestingly, all racial group showed an increase in employment, except white South Africans, which showed a fall in employment, and possibly pointed towards the more stringent implementation of affirmative action,” he added.

The Stats SA survey showed that 148 000 out of the 157 000 jobs gained were in the community and social services sector, with Limpopo, KwaZulu Natal and North West showing the biggest growth in employment numbers.

This was followed by about 70 000 jobs created in the manufacturing sector and 28 000 in the trading industry, while 13 000 jobs were lost in agriculture, employment in construction decreased by 20 000 and 31 000 jobs were lost in financial services.

“I think it's safe to say that, except maybe for manufacturing, a lot more jobs came from the public sector than from the private sector. This is unsustainable, as government is not necessarily seen as a productive part of the economy. South African taxpayers are already paying large amounts to salaries in the public sector and welfare cheques, which is why the government now has to start tolling the Gauteng roads to build its infrastructure,” said Schussler.

Nevertheless, Radira said that government’s plans to create employment opportunities would be key for employment growth in the coming quarter.

Clarity on these plans would likely be provided in the State of the Nation Address or the budget statement, expected later this month.