Manufacturing recorded a stellar 20% quarter-on-quarter increase in jobs in the first three months of the year but the momentum appears likely to flag given rising input coasts and continual load-shedding.
The latest labour survey report, released by StatsSA on Tuesday, shows the sector added 263,000 jobs in the first quarter, compared with the loss of 85,302 jobs in the fourth quarter of last year.
The performance contributed to a total increase of 370,000 jobs quarter on quarter. The official unemployment rate dropped by 0.8 of a percentage point to 34.5%.
Dawie Roodt, economist at Efficient Group, said manufacturing was where the country needed to create jobs to cut unemployment, but added: “I don’t think the numbers will be repeated. Manufacturing is dependent on electricity, which is a problem and will remain so for a long time. So that is a factor that will be an obstacle for a significant rebound in production and manufacturing.”
He cautioned that the latest figures did not really indicate a trend but were more of a post-lockdown bounce back after the pandemic’s broad impact on the entire economy.
“We saw economic growth collapsing then bouncing back again,” Roodt said. “Lockdown really disrupted a lot of things … What I want to know is what the underlying trends are. The data is gradually coming back to the real underlying trend and it is stabilising.”
What I want to know is what the underlying trends are. The data is gradually coming back to the real underlying trend and it is stabilising
— Dawie Roodt
It is not clear from the survey which sub-sectors within manufacturing created most jobs in the first quarter, but FNB senior economist Thanda Sithole said: “We suspect that the petroleum-related, food and beverages, basic iron and steel and motor vehicles sub-sectors underpinned this jobs growth.”
He also cited persistent load-shedding as a major constraint on manufacturers and noted that in addition they faced higher input costs, as reflected by double-digit manufacturing producer inflation.
The floods in KwaZulu-Natal in April disrupted manufacturing companies in the region, and higher retail prices could curtail consumer spending, Sithole said.
On top of the domestic factors, global uncertainty due to the war in Ukraine and concerns about weakening demand mean local manufacturers “are likely to remain cautious about employment decisions”, said Sithole.
There is no clear indication that employment growth in the sector could be maintained, he said.
“The PMI [purchasing managers’ index] employment subindex has broadly moved sideways this year, averaging around 49.96 points. Our view is that while we expect the manufacturing sector … to contribute positively to growth this year, employment will continue lagging,” he said.
The PMI, compiled by the Bureau of Economic Research at Stellenbosch University and sponsored by Absa, is an indicator of trends in the manufacturing and service sectors.
The latest jobs numbers came as the Absa PMI rebounded by 4.1 index points to 54.8 in May, reversing some of the ground lost due to the floods in April, said Virag Forizs, emerging markets economist at Capital Economics.
Forizs warned that the recovery in the manufacturing sector was on shaky ground given ongoing power cuts.
“And price pressures don’t seem to be letting up. The central bank is likely to deliver another 50 basis point interest rate hike at the next meeting before reverting to smaller rate hikes,” she said.
The May PMI figure is still below the 60 points it reached in March, and the average for the first two months of the second quarter is almost six points below the average in the first quarter.
“The average for the business activity index for April and May is well below 50, which suggests that actual manufacturing output may record a quarterly contraction in the second quarter,” the PMI report states.
Philippa Rodseth, executive director at Manufacturing Circle, said the second quarter of last year was the first time that manufacturing jobs fell below 10% of total employment, an indication that the economy had not been doing well even before Covid struck and made everything worse.
“We’re watching what will happen as the economy opens up and whether any growth in manufacturing will translate into the reabsorption of jobs. The fact that the latest quarterly labour survey indicates an increase in jobs is a positive sign for us, indicating that in the overall sector jobs are being reabsorbed, and that is really important.
“We are however still getting a better understanding of the number of jobs reflected, and in which sub-sectors these sit, as we do not see positive growth across the board when speaking to our various member companies.”
Rodseth said the manufacturing sector is “very responsive to the external environment”; if the economy grows demand for manufactured products will rise, which could result in additional jobs.
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