The focus this week will be on the quarterly labour force statistics for the second quarter published by Stats SA on Tuesday.
SA’s jobless rate edged higher in the first quarter, increasing by 0.2 percentage point to 32.9%. The highest employment losses were recorded in the energy-intensive and private household sectors, pointing to the impact that heightened rotational power outages, high interest rates and accelerating inflation have inflicted on the economy.
Load-shedding averaged stage 4 in February and stage 3 in March, leading to a flurry of downward revisions of the economic growth forecast.
By the time the first-quarter employment numbers came out, interest rates had been raised 425 basis points (bps) since the start of the hiking cycle, increasing direct pressure on household disposable income. They have increased another 50 bps since then.
The country’s employment outlook remains constrained by heightened uncertainty, continued electricity and logistics challenges, and stagnant economic growth.
Investec economist Lara Hodes said these numerous challenges continue to undermine the ease of doing business — weighing on the country’s competitive position and hindering investment potential from local and international investors.
“A lack of growth, with GDP expected to be marginal this year, continues to impede job creation, which hasn’t yet recovered to levels seen before the pandemic,” Hodes said. “We expect the unemployment rate to remain around 32.5% in the second quarter.”
While there has been some recovery in employment following the pandemic, with just over 1.9-million cumulative net employment gains over the past six quarters, the unemployment rate remains elevated compared with the first quarter of 2008 when it registered 23.2%.
The youth unemployment rate is much worse, with a 62.1% reading in the first quarter and 71.2% using the expanded definition, which includes people who were available for work but not looking for a job.
The data shows that the expanded definition of unemployment posted at 42.4% in the first quarter, down from 42.6% in the fourth quarter of 2022.
SA Special Risk Insurance Association (Sasria) CEO Mpumi Tyikwe recently warned that the unemployment crisis could spark a “revolution” as young people sit idle.
Nedbank senior economist Johannes Khosa said slower demand in most major economies, hurt by the high cost of living, will continue to exert downward pressure on commodity prices and weigh on export-orientated industries such as mining and manufacturing.
“Unfortunately, those two industries are also power-intensive and will therefore suffer the most pain from the electricity crisis,” Khosa said.
Jee-A van der Linde, a senior economist at Oxford Economics, said the unemployment rate is expected to hover at current high levels for as long as the electricity crisis persists. “Businesses are unable and disinclined to expand operations in the current economic climate, and the business mood has soured notably since the start of 2023,” he said.
Absa senior economist Miyelani Maluleke said anecdotal reports of elevated emigration of wealthy South Africans abound, while the alarmingly high youth unemployment rate is a particular concern for long-term social and political stability.
“The ANC has mostly steered clear of fully populist economic policies, but the risk of such an approach — for example, on the social grants front — could increase as the ANC’s popularity wanes,” Maluleke said.
Absa expects unemployment to remain at 32.9% in the second quarter.
Stats SA will publish data on retail sales for June on Wednesday, rounding off the second-quarter releases for the sector and give a clearer indication of its contribution to the quarter’s overall headline GDP reading.
Retail sales shrank for a sixth consecutive month in May, suggesting SA consumers are having a tough time contending with the high-price environment, compounded by weak economic activity and high unemployment.
Retail sales volumes fell by 1.4% year on year in May after contracting by 1.8% the previous month.
FNB chief economist Mamello Matikinca-Ngwenya said volumes sales are down 0.7% on a quarterly basis, giving early indications that the retail industry could detract from second-quarter GDP growth.
“Looking ahead, the unexpected load-shedding reprieve and near R1 fuel price relief in June could provide near-term support, though this must be weighed against higher debt costs,” Matikinca-Ngwenya 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.