Thanks for your response, I am sorry for not getting back to you soon. I have searched some other forums and figured out that CREATE SCHEMA statement is not valid in DB2 for z/OS. Apparently the manual I was looking earlier was that of DB2 for LUW.
The workaroud for creating a schema is if you want a schema JOE to be created create a table JOE.* in the database and DB2 creates the schema.