South Africa needs to work harder to boost the current sluggish rate of creating jobs, with the employment still well below 2008 levels, President Jacob Zuma said on Wednesday.

Zuma's government has singled out reducing unemployment as a prime challenge facing Africa's biggest economy, which shed about a million jobs during a recession in 2009.

At this point there are 64,000 more jobs in the economy than a year ago, but total employment, including both paid jobs and self-employment, is still substantially below 2008 levels, Zuma said in a speech to the automotive industry in Eastern Cape province.

Zuma's government has rolled out what it calls a New Growth Path that aims to create 5 million jobs by 2020 through heavy state influence in the labour market.

Zuma has also called for setting up a 9 billion rand fund to reduce youth unemployment and having the state-run Industrial Development Corporation set aside 10 billion rand to invest in areas that have high potential to create jobs.

But Zuma's ruling African National Congress has allocated billions of dollars over the years for job creation and training only to find the money lost to inefficiency and corruption, with few economists expecting the latest plans to do little more than swell state spending.

Economists have also been worried his government is going down the wrong path by relying too heavily on the state to create work over the private sector.

A presidential report said major labour reforms Zuma's administration proposed could cause millions more to lose their jobs by making an already rigid labour market more inflexible --

adding costs to employers and driving up wage bills for a workforce already more expensive than those in emerging market rivals.

Latest data from Statistics South Africa shows the unemployment rate rose to 25.7 percent of the labour force in the second quarter of this year from 25.0 percent in the first quarter as the key mining and manufacturing sectors shed jobs.

Zuma said it was worrying that most jobs in the second quarter were lost by young people who make up 30 percent of the employed but suffered 60 percent of jobs losses.

The government has said the economy needs to expand by 7 percent a year to make a dent on unemployment and lift millions of its 50 million population out of poverty, but growth remains sluggish at slightly above 3 percent.

We will have to work much harder together, to reach the New Growth Path target for 2020, which is five million jobs, he said.