Unemployment is the defining characteristic of the South African economy with distinctive dynamics: Up from 29.1% in 2020Q1 before lockdown effects could be felt to 34.4% in 2021Q2 (44.4% including discouraged). The youth are particularly affected with 64.4% without a job in 2021Q2, and unemployment follows GDP growth patterns closely.
This paper investigates the drivers of the double negative trend in two ways:
- Firstly, by providing evidence of hysteresis in the unemployment series for South Africa.
- Secondly, by using a simple model of insider-outsider dynamics to identify the causes of hysteresis and discussing the implications this finding generates.