It may seem surprising and positive that the figures released by Statistics South Africa (Stats SA) showed an improvement in the unemployment rate to 23.3% in the second quarter, compared with the rate of 30.1% in the first quarter, but financial services provider Nedbank believes the numbers were hampered by data collection limitations.
Trade union UASA, meanwhile, shares the cautionary view that the numbers were rather the result of the national lockdown preventing people from actively going out and looking for work, thereby classifying them as not economically active.
Professional services firm PricewaterhouseCoopers agrees that it would be more accurate to consider the expanded definition for the unemployment rate, which was at 42% during the second quarter.
The firm expects a net loss of 1.5-million jobs by the end of the year, explaining that some of the 2.2-million jobs lost in the second quarter will likely be recovered in the second half of the year.
UASA’s 'South African Employment Report', with contributions from economist Mike Schussler, estimates between 1.3-million and 3.3-million job losses across all sectors by March 2021.
The Quarterly Labour Force Survey is a household-based sample survey and data collection is usually done on a face-to-face basis; however, owing to Covid-19 restrictions, the data for the second-quarter had to be collected through computer assisted telephone interviewing.
As not all households had contact numbers or some numbers were invalid, the calculations for the second-quarter survey were not based on the full sample and therefore strict comparisons with previous quarters could not be made, Nedbank says.
The bank states that a surface reading of the second-quarter numbers shows that the number of unemployed dropped by 2.8-million, or 39.2% quarter-on-quarter, and decreased by 2.4-million, or 35.5% year-on-year, during the second quarter.
A surface reading of the second-quarter numbers also shows that the number of discouraged workers also decreased by 447 000, or 15.3%, quarter-on-quarter, and by 278 000, or 10.1%, year-on-year.
“This would usually mean that the number of employed has risen significantly, but this was not the case. The number of employed fell by 2.2-million – both quarter-on-quarter and year-on-year, while the noneconomically active population instead jumped by 5.6-million quarter-on-quarter and by 5.4-million year-on-year.
“A worrying pattern that has been seen throughout most of the world,” Nedbank notes.
The switching out of the labour market to predominately non-economically active for reasons other than discouragement means that the expanded definition of unemployment – to include discouraged workers – increased marginally to 42% in the second quarter from 39.7% in the first.
According to Stats SA, the bulk of the labour force that switched over to this category were from the ranks of the unemployed. This switching is probably linked to Covid-19, as presumably many in the labour force would have not only given up looking for employment, but were unable to do so because companies were closed, and they were mostly confined to their homes during higher levels of the lockdown.
Also, as can be expected, the labour force participation rate declined by 13% to 47.3% in the second quarter.
All sectors shed jobs over the second quarter, with the biggest losses recorded in community and social services, losing 515 0000 jobs, trade losing 373 000 jobs and private households losing 311 000 jobs.
Most of the job losses were in the formal sector, losing 1.2-million jobs, with the informal sector losing 640 000 jobs.
Nedbank notes that the latest labour figures make forecasting future employment figures challenging because doing so would require knowledge of how many of the non-economically active – for reasons other than discouragement – group would once again enter the labour force.
The numbers, however, also signal how difficult the economic recovery will be, with so many having completely dropped out of the labour force.
“The chances of a V-shaped recovery are probably out of reach and the South African economy will need some form of further stimulus. The Reserve Bank, by keeping rates on the hold, have signalled that they have done as much as they can for the recovery, therefore other more structural changes will have to take place to put the South African economy on a better footing,” Nedbank says.
Moreover, Steel and Engineering Industries Federation of Southern Africa chief economist Dr Michael Ade says the Quarterly Labour Force Survey highlights the urgency that is needed to address fundamental factors inhibiting job creation in the country.
He comments that the manufacturing sector, of which metals and engineering (M&E) forms part, shed 250 000 jobs over the second quarter compared with the first quarter of the year, which equates to 14% of the sector’s employment.
Ade says that although the decrease in employment was mainly underpinned by the Covid-19 economic lockdown spanning alert levels five, four and three, which also distorted production levels, other key contributing factors were trade and consumption patterns, persistent insufficient domestic demand conditions, structural challenges and uncertain global trade dynamics faced by most industrial sectors.
He adds that the situation was not helped by the fact that local companies had been operating below production capacity and at sub-optimum production levels as they tried to minimise input costs, including uncontrollable fuel and energy costs, despite not trading and selling during the lockdown.
These alarming dynamics had negatively impacted on both formal and informal employment numbers in the manufacturing industry and the M&E sector in particular.
Ade believes a collegial approach is needed to ensure that delineated interventions aimed at reducing persistent unemployment are successful. He has called for “all hands on deck” to stop the predicament, saying it is the responsibility of all South Africans and not just government.
Meanwhile, the number of people working in relation to the working-age population tumbled to 36.3% in the second quarter from 42.1% in the first quarter.
Sakeliga CEO Piet le Roux says the employment rate currently gives a more accurate picture than the unemployment rate.
He adds that the political, social and humanitarian consequences of 2.2-million people in South Africa losing their jobs tower above the risk of Covid-19. He believes the lockdown should be abolished immediately and drastic mitigation measures, such as a moratorium on the minimum wage, should be introduced without further delay.
“This is the least that the government can do for the unemployed and businesses after an irresponsible state of lockdown that paralyzed businesses, employees and society nationwide.
“South Africa is becoming a hotbed for political and social instability, not to mention the decline in life expectancy due to economic deprivation. The most important aid packages are not more government debt and stimulus packages, but the abolition of harmful labour restrictions, as with the proposed moratorium on the minimum wage,” Le Roux states.