We document the rise in unemployment in South Africa since the transition in 1994. We describe how changes in labour supply interacted with stagnant labour demand to produce unemployment rates that peaked between 2001 and 2003. Meanwhile, compositional changes in employment at the sectoral level widened the gap between the skill-level of the employed and the unemployed. Using nationally representative panel data, we show that stable unemployment rates mask high individual-level transition rates in labour market status. Our analysis highlights several key constraints to addressing unemployment in South Africa. We conclude that unemployment is near equilibrium levels and is unlikely to selfcorrect without policy intervention.JEL classifications: J08, J68, O12. 1 We thank David Deming, Matias Horenstein, Vimal Ranchhod and Paulo Somaini for research assistance and an anonymous referee for helpful comments and suggestions. Special thanks to Jairo Arrow, Jacques deKlerk and the rest of the team at Statistics South Africa for constructing the LFS panel. 716Banerjee ET AL .

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