Even as SA logged a slight fall in the unemployment rate in the first quarter, economists warn those gains may be erased by the adverse impact of a weaker global environment directly weighing on export potential and a tightening of domestic monetary policy.
Raymond Parsons, an economist at North-West University Business School, said the positive development in the unemployment rate is in view of inevitable time-lags, following SA’s strong economic recovery in 2021 from the previous pandemic lockdowns.
However, the recovery, which could be seen by policymakers as imperceptible, will not be sustained in the months ahead, according to Parsons and several others economists, as a weaker global economy, devastating floods in KwaZulu-Natal and power blackouts worsen the outlook for putting millions of South Africans into jobs.
Stats SA on Tuesday published its Quarterly Labour Force Survey showing the unemployment rate fell from a record high of 35.3% in the fourth quarter to 34.5% in the first quarter. The posting is in line with the median estimates of four economists surveyed by Bloomberg.
Using the expanded definition, which includes those who have given up looking, the rate of joblessness stood at 45.5%, a slight fall from 46.2%.
Africa economist at Oxford Economics Jee-A van der Linde told Business Day that “local and foreign factors on business supply chains will see these gains reversed as a result of renewed negative global and domestic economic trends that emerged in the second quarter”.
Even though SA’s economic trajectory started the year positively, with corporate profitability recovering, the country’s upturn is now threatened by concerns about global stagflation, the dilemma of high interest rates, slow economic growth and high unemployment.
Conditions in SA sectors that supply the export market have remained subdued as global demand is restrained by the slowdown in China’s economic growth, the impact of the Russia-Ukraine war and tighter monetary policy.
“The risk now is that these factors may yet put a spoke in the wheel of the jobs recovery,” Parsons said. He thinks SA needs GDP growth rates of 3%-4% to make a serious dent in unemployment levels.
“SA therefore needs to break out of its ‘low-growth trap’ by collectively expediting the urgent implementation of key economic reforms.”
In a note, PwC economists project SA’s unemployment rate to top 35.6% in 2022 and 36% in 2023, citing a deterioration in economic momentum across the globe. It said it had revised downwards its global economic growth forecast for 2022 by 1.3 percentage points.
What this means on the local front is that the slowdown in global and domestic economic growth will result in fewer jobs being created, PwC said.
FNB economist Thanda Sithole said the lack of job gains alongside the rising cost of living may put additional pressure on the employed and further expose the fiscal constraints of the country, which is weighing making permanent the Covid-19 unemployment grant introduced in 2020, and on Tuesday, proposed spending an additional R4.5bn to extend the reduction in the fuel levy.
Sithole said the current level of private sector fixed investment at 10.2% of GDP, alongside higher production costs and elevated global uncertainty, implies that the recovery could be prolonged, with the unemployment rate remaining sticky above prepandemic levels.
With nearly half the country’s working-age population jobless under the broad definition of unemployment, the risk of unrest will remain high, according to Van der Linde.
His comment conjures up memories of July 2021, when anger about the arrest of former president Jacob Zuma morphed into a wider outrage about poverty.
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