SOUTH Africa's economy continued to shed jobs during the month of August with only an increase in temporary jobs, the Adcorp Employment Index revealed yesterday.

The index showed an August dip which translated into an annual job loss rate of 49306 workers.

Adcorp, the country's largest diversified employment services company, attributed the loss of jobs to "government crowding out private sector participation in the economy".

Overall employment declined by 2,1% in August - the fourth consecutive monthly decline - employment by government continued to rise, by a notable 6,2%.

"The public sector now accounts for all the job creation in the economy for 2011 as a whole," says Loane Sharp, Adcorp labour market analyst.

The index showed that in August employment declined most sharply in the manufacturing (19,9%), mining (19,3%) and construction (16%) sectors.

But the unofficial (temporary) sector continued to create jobs, employing 16917 additional people in August, enhancing the "informalisation" of the country's workforce.

Sharp said temporary work bore a close relationship to the economy's underlying health and could be considered a leading indicator of permanent employment conditions.

He said permanent jobs, which were beset by legal and regulatory problems, were an unreliable indicator of business activity.

"In August the capacity utilisation of temporary staff - the number of hours actually worked in relation to the number of hours per temporary worker - dropped to 74,6%, a decline of 8,1% at an annual rate and the worst decline in four months," he said.

Sharp notes that job creation tends to lag improvements in the economy by between 24 and 36 months.

"The upshot is that temporary work follows economic activity fairly closely, since employers are able to use contract workers for fixed, typically short durations on an as-needed basis."