SA’s unemployment rate hit a fresh high in the third quarter, with signs emerging that even as lockdown restrictions eased the country’s labour market faces permanent damage.
Though economic activity picked up in the third quarter after the shock experienced during the worst of the lockdown, Stats SA’s latest quarterly labour force survey suggests jobs numbers will not bounce back as robustly, with some economists warning that permanent losses are likely to rise to well over 1-million.
SA’s unemployment crisis, aggravated by the pandemic, is a headache for President Cyril Ramaphosa’s cash-strapped government, which is trying to balance stimulating economic activity even as its financial position deteriorates.
In a statement responding to the data on Thursday evening, the president highlighted interventions announced in the economic reconstruction and recovery plan, including employment stimulus plans such as the recruitment of teacher and school assistants in every part of the country.
"These measures, alongside an ambitious infrastructure programme which is already showing tangible results, will support a recovery in employment in the short and medium term," he said.
The jobs data followed Ramaphosa’s announcement of further easing of restrictions on economic activity. These include reopening borders to all international travellers; lifting restrictions on liquor sales; and extending income support for another month under the Unemployment Insurance Fund’s Temporary Employer/ Employee Relief Scheme (Ters).
SA’s official unemployment rate rose to 30.8% in the third quarter, reaching its highest level since the survey began, according to Stats SA.
Meanwhile, the country’s expanded definition of unemployment — which includes discouraged work seekers who have given up looking for jobs — rose to 43.1% from the second quarter’s 42%.
The increase in the official rate was in line with expectations and came after a dramatic drop in the jobless rate to 23.3% in the second quarter due to a technicality that disqualified a large number of the labour force from being defined as unemployed because they could not actively seek work during the lockdown. These people were classed as "not economically active" during the period.
With the reopening of the economy, allowing more people to actively seek work, there was a large shift of people out of the not economically active category, with the movement proportionally more towards those classified as unemployed.
Though there was a rise in employed people by almost half a million to 14.7-million in the third quarter, this was outweighed by a substantial leap in the number of unemployed people. Their number reached 6.5-million, a 2.2-million increase from the previous three months.
Looking at jobs in the formal sector, RMB chief economist Ettienne le Roux highlighted that out of the more than 1.2-million jobs lost in the second quarter, only 242,000, or about 24%, were recovered in the third quarter. "While this figure should climb further still, the low formal sector absorption rate in [the third quarter] is nonetheless concerning, especially amid lockdown restrictions having been relaxed and real economy activity having bounced back strongly," Le Roux told Business Day. "This points to a notable degree of scarring in the wake of Covid-19."
Given the severity of the recession, the closure of low-profitable companies and corporate divisions was always going to have a detrimental effect on the labour market, Le Roux said.
Despite the easing of lockdown regulations in the third quarter, the record level of job losses experienced in the previous three months "is still very much a persistent factor in the SA economy", Casey Delport, an investment analyst at Anchor Capital, said in a note.
As the country continues to claw its way back from the hard lockdown shock, the headline unemployment rate could continue to rise.
In the coming quarters, though there is likely to be an increase in the number of employed people, this will be outpaced by the number of people entering the labour market in search of work, said Sanlam Investments chief economist Arthur Kamp.
This will lift the unemployment rate towards about 35% with overall job losses in the region of 1.6-million, he said.
Trends in the manufacturing sector suggested that there has been permanent damage to the labour market, said Kamp. Despite a marked increase in actual production activity during the third quarter, the manufacturing industry only managed to add about 2,000 jobs over the period, he noted.
"This makes it very difficult for Treasury because in an environment like this there is clearly sustained need for support," he said.
Though the government extended the Ters programme by a month, as well as the special relief of distress grant to January, the crisis has reignited the debate over more comprehensive income support such as a basic income grant. Ramaphosa has previously indicated that this option is unaffordable given current constraints on the budget.
Despite an expected increase in jobs during the fourth quarter, PwC economists Lullu Krugel and Christie Viljoen said net losses of roughly 1.4-million could materialise by year end.
"This will compound the existing challenges seen prior to the pandemic in creating enough value-adding jobs in SA," Krugel and Viljoen said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.