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  • Writer's pictureRoss Mengel

The impact of lower inflation and improved employment figures on the job market in SA

Last week, Stats SA announced that headline inflation in South Africa had declined from 6.3% in May to 5.4% in June, back below the 6% upper limit of the South African Reserve Bank’s monetary policy target range and the lowest reading since 5.0% was recorded in October 2021.


This is on the backdrop of our expanded unemployment rate decreasing slightly to 42,4% in Q1:2023, from 42,6% in Q4:2022, with employment figures increasing for the sixth consecutive quarter.

So, what will the potential impacts be of lower inflation and slightly improved employment figures on the job market in South Africa? Thanks to some input from ChatGPT, this is likely to have several positive impacts:

Increased hiring activity

Lower inflation instils greater confidence in businesses regarding economic stability, encouraging expansion and growth. Coupled with the rising demand for labour due to increased employment figures, companies are likely to engage in more hiring to meet growing demands and seize new opportunities.

More favourable wages

Lower inflation typically results in stable or slower wage growth. However, with an upward trend in employment figures, the demand for skilled workers may increase, giving job seekers more negotiating power and the potential for higher wages compared to periods with stagnant or declining employment figures.

Improved job market competitiveness

As employment figures rise, job seekers may find themselves in a more competitive job market. This scenario compels companies to offer attractive compensation packages and additional benefits to attract skilled candidates, providing job seekers with more options and better opportunities.

Skills shortage mitigation

If the upward trend in employment figures reflects successful placements of skilled workers, it may help alleviate skills shortages in certain industries. Companies, especially those experiencing growth, will be motivated to recruit talent locally and internationally to address their skill requirements.

Positive economic sentiment

A combination of lower inflation and increased employment figures can foster positive economic sentiment in South Africa. This optimism encourages businesses to invest more in their operations, leading to further job creation and expansion, resulting in a self-reinforcing cycle of growth.

Talent retention challenges

As employment opportunities increase, companies may face challenges in retaining existing talent. Employees could be enticed by better opportunities elsewhere, leading to increased job hopping. This situation prompts companies to invest in talent retention strategies to keep their workforce engaged and satisfied.

Upskilling and training investments

To meet the growing demand for skilled workers, companies might invest more in upskilling and training programmes. This investment can improve the pool of available talent and enhance the employability of individuals looking to transition to new industries or roles.

Redundancy of certain positions

Even in times of overall growth, positions may become redundant due to various factors such as mergers, takeovers, organisational restructures, downsizing, or the adoption of new technologies that demand a different set of skills. It is essential for individuals to be proactive in adapting to these changes by upskilling continuously and staying abreast of emerging trends to enhance employability and improve resilience to such transitions.

Whilst economic conditions are subject to various external and internal factors, and the combined effect of lower inflation and improved employment figures can interact with other economic indicators in complex ways, overall, the synergy of these two factors is likely to create a more favourable recruitment environment for both employers and job seekers in South Africa.

To find out more about how DMA Group can assist your organisation with talent sourcing, retention and outplacement, call us on 011 888 9009, email info@dma-group.co.za or visit www.dma-group.co.za to find out more.




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