All eyes will be on the release of the first-quarter quarterly employment survey this week as the extent to which employment regains ground lost during the first wave of Covid-19 will help confirm that a broader economic recovery is under way.
Unfortunately, economists are expecting the business survey to show only modest gains in formal employment when it is released by Stats SA on Tuesday.
SA lost 726,000 formal sector jobs during the first three months of Covid-19 and has subsequently added back only 133,000 of these.
Though the economy grew by a healthy 4.6% quarter on quarter in the first quarter, with most sectors making a positive contribution, there are several reasons why this is unlikely to have translated into rapid job creation, according to Stanlib chief economist Kevin Lings.
First, he explains, the second wave of Covid in late 2020 dented confidence and likely created some hesitancy within the formal sector to rehire. This has been worsened by renewed electricity outages.
In addition, many companies have been forced to cut costs and re-evaluate the size of the workforce required in an extended Covid environment.
Consequently, he expects the quarterly employment survey to show only a “fairly modest” gain of about 55,000 to 85,000 jobs, leaving formal sector employment still significantly below its pre-Covid level.
“Given the prevailing economic conditions is seems likely that it will take the economy a number of years to regain all of the jobs lost during the first year of Covid-19,” says Lings.
The FNB/BER consumer confidence index for the second quarter will be released on Monday. It edged up to -9 in the first quarter of 2021 from -12 in the last three months of 2020, bringing confidence back up to pre-lockdown levels.
However, this was still well below the long-term average of two index points and it will probably take an improvement in job creation for confidence among low-income households to recover, especially as food and transport costs rise, says FNB chief economist Mamello Matikinca-Ngwenya.
Statistics on liquidations and insolvencies will be published on Monday and will provide a useful gauge as to the degree of permanent scarring the economy has suffered from the pandemic. So far, the number of company closures has been a lot lighter than expected. After peaking at 272 in November 2020, the number of liquidations has started to trend lower, totalling 158 in April.
The monthly national budget balance for May will be released on Wednesday.
BNP Paribas economist Jeff Schultz expects a narrowing in the deficit to about R2bn from April’s R80.4bn deficit in line with his view that better-than-expected nominal GDP growth will allow the Treasury’s budget targets to be met or even improved on this year.
Private sector credit extension data for May will be released on Wednesday. In April, it slipped deeper into contractionary territory, recording a decline of 1.8% year on year, mainly due to a steep 6.7% year-on-year drop in corporate credit growth.
Schultz expects private sector credit extension growth to have contracted by a smaller 0.9% year on year in May as Covid-related base effects fade from the numbers. Even so, he thinks the data is still likely to reflect a relatively subdued flow of credit into the economy, given the uncertain economic outlook and more cautious bank lending.
SA’s trade balance for May will also be released on Wednesday. It has remained firmly in surplus over the year to date, recording R51.2bn in April and R52.6bn in March. Economists expect another large number, thanks to the surge in SA’s terms of trade, which has risen by almost 12% over the past year and more than 20% since the end of 2018, one of the strongest gains on record.
The Bureau for Economic Research (BER) manufacturing purchasing managers’ index for June will be released on Thursday. With a return to stage 4 load-shedding in June, the index might have moderated slightly from May’s 57.8 reading though the fact that local manufacturers continue to benefit from healthy global demand and the commodity uplift should provide ongoing support.
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