In a week of bumper economic data releases, the spotlight will be on the long-delayed employment data in the hopes that the economy’s robust first-quarter performance allowed for a pick up in job creation.
SA’s official unemployment rate increased to 35.3% in the last quarter of 2021 from 34.9% in the third quarter meaning that fewer than 10-million people are now formally employed out of a total labour force of about 22-million.
While SA initially added back some of the jobs lost during the severe lockdowns at the start of the pandemic, the number of people employed (formal as well as informal) remains 1.8-million below the level reached before the onset of Covid-19 in 2020.
SA’s low overall level of employment is “disastrous” when you consider the already high level of unemployment that existed before Covid-19, says Stanlib chief economist Kevin Lings.
“Under these circumstances it is impossible for any economy to reflect any level of sustained economic success and an upliftment in lifestyles.”
The Quarterly Labour Force Survey for the first quarter will finally be published by Stats SA on Tuesday.
Investec economist Lara Hodes expects the official unemployment rate to have remained largely flat at about 35.5%.
Though she expects to see a modest increase in full-time positions, she anticipates a drop in part-time jobs after the strong seasonal pickup in the fourth quarter of 2021 especially in the tourism, hospitality, and related sectors.
First National Bank chief economist Mamello Matikinca-Ngwenya notes that SA has been plagued by “persistent slack in the labour market” as the rate of employment has been rising slower than the growth of the total labour force for some time.
Before the pandemic, in the final quarter of 2019, the ratio of people employed in SA to the total working age population ratio was 42.4%. By the final quarter of 2021, it had dropped to just 36.5% compared with the global average of 54.8%.
However, there have been concerns over the quality of the data with the survey response rate having dropped to 44.6% compared with an average response rate of 76.9% before the pandemic.
The trade balance for April will also be published on Tuesday.
Since April 2020, when a deficit of R35.9bn was recorded, a combination of strong commodity export prices and subdued domestic import demand has allowed SA to enjoy a healthy, sustained trade surplus. This has provided strong support for the rand exchange rate.
Over 2020 as a whole, the trade surplus amounted to R271bn. Last year it ballooned to R441bn. In March, another bumper R45.9bn was recorded, bringing the cumulative trade surplus for the first three months of the year to R62.1bn or 5.1% of GDP.
However, BNP Paribas economist Jeff Schultz expects the trade surplus to narrow sharply to 3% of GDP in the second quarter — and from R45.9bn in March to R12.8bn in April — given that devastating flooding in KwaZulu-Natal created severe port blockages and freight export delays.
Hodes is more bearish, forecasting that April’s surplus may have narrowed to as little as R10.2bn.
But as long as the prices of SA’s major export commodities remain elevated, Matikinca-Ngwenya expects SA to post another substantial trade surplus over the year as a whole.
“This should cushion the domestic currency from the risk of global growth concerns and tightening global financial conditions,” she says.
Private sector credit extension for April will also be released on Tuesday. It is expected to be slightly up on the 5.9% year on year recorded in March.
The indicator has climbed up steadily from 3.6% in February due mainly to base effects and increased credit uptake by the household and corporate sectors.
Household credit ticked up from 5.6% year on year in February to 6.1% year on year in March while corporate credit rose from 2.0% to 5.7% year on year.
“The corporate sector, which was particularly affected by the stringent lockdown restrictions imposed during the height of the pandemic, has gained momentum,” says Hodes. “But a substantial lift in business confidence, which is still largely subdued, is needed to drive significant investment.”
On Wednesday, the Absa manufacturing Purchasing Managers’ Index (PMI) for May will be published.
After three consecutive months of expansion, the PMI fell sharply to 50.7 index points in April from 60 in March — the lowest PMI reading since the July 2021 unrest.
However, since the sharp decline was mainly caused by the disruption to economic activity caused by the KwaZulu-Natal flooding, economists are hopeful that the drop will prove temporary.
Investec is expecting the PMI to rebound to 51.2 for May but Hodes remains aware that with load-shedding having been ramped up, electricity supply constraints remain a risk to manufacturing sector activity.
Schultz expects the index to bounce back to 52 in May but has concerns about the outlook for the remainder of the year.
“Some hangover effect from damage to major ports and road infrastructure means that the improvement in sentiment is likely to vary widely and could continue to impact on supplier delivery times and new sales orders expectations,” he says.
“Add to this growing energy supply-side challenges in the economy ... and a slowing China and Europe, and the outlook for industrial production doesn’t look particularly healthy in the second half of the year.”
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