While the Solidarity-ETM Labour Market Index (LMI) improved to 42.5 index points in the third quarter, up from the downwardly revised 41.9 in the second quarter, the trade union cautioned against premature talk of “green shoots” of recovery in the South African economy.
The trade union said the slight rise in the LMI was of little significance, given that the index still remained well below the neutral 50-point mark and below even the depressed levels of 2015.
While some encouragement can be taken from the fact that the index did not fall and has been rising for two quarters, the overall LMI still paints a bleak picture for labour.
“Unfortunately, macroeconomic indicators, such as motor vehicle sales, household credit measurements and surveys on business demand conditions are concerning and are suggesting that any talks of ‘green shoots’ of economic recovery may be premature,” Solidarity Research Institute economics researcher Gerhard van Onselen said.
Meanwhile, the Solidarity Employee Confidence Index (ECI), a subcomponent of the LMI, improved from 40.8 in the second quarter to 43.1 in the third quarter.
“Only 11% of the participants in Solidarity’s quarterly survey of members reported they felt more secure in their jobs compared to three months before. Nearly two-thirds of respondents reported no change in job security, whereas the remainder of respondents, 25%, reported they felt less secure,” Van Onselen said.
The Labour Affordability Index and the ETM Business Cycle Index, the other subcomponents of the index, remained weak and well below 50. “Among other things tracked by these components, sluggish reported demand conditions for businesses, weak vehicle sales and slowing household credit growth are especially concerning,” he pointed out.
“Much has to happen to get labour conditions out of the present slump. First and foremost, pro-market reforms, with a removal of regulatory hurdles and costly red tape, as well as political meddling in the economy, are needed for an appropriate channelling of resources and renewed investment in the economy,” Van Onselen added.
The LMI forms part of the quarterly Solidarity-ETM SA Labour Market Report.
Looking forward, Solidarity Research Institute political analyst Dr Eugene Brink highlighted that a number of “weighty matters” would probably remain unresolved at the end of the year and would only come to a head in 2017.
This includes reports of further possible legal action facing Finance Minister Pravin Gordhan.