Unemployment crisis at its worst yet, and not ending soon
It seems that the worst of the unemployment crisis has hit South Africa during the third quarter of the year and growth of employment is expected from this level as more sectors of the economy start to open now.
A man begging for change in Randburg, holds a sign hoping for donations, 12 November 2020. Picture: Tracy Lee Stark
According to the latest figures in the Quarterly Labour Force Survey (QLFS) issued by StatsSA, unemployment, according to its expanded definition, has significantly increased by 7,5 percentage points to 43,1% in the third quarter of 2020 compared to the second quarter of the year.
Prof. Jannie Rossouw, interim head of the Wits Business School, says the statistical impact was to be expected, given the aberration in the stats published in the previous quarter, when the unemployment figures on the narrow definition of people who actively looked for jobs were completely distorted because people could not look for work during the lockdown.
“The improvement in employment numbers, with a growth improvement, will probably only be visible from 2021. We need to reduce unemployment with more rapid economic growth, as there is a link between economic growth and employment growth,” he says.
Economist prof. Bonke Dumisa says although the figure of 30.8% given by StatsSA is “uncomfortably not comparable” to the earlier figures used by StatsSA for earlier quarters, the figures used confirm just one thing: that the unemployment rate in the third quarter of 2020 was not better than in the second quarter of 2020.
He believes that the figures for the fourth quarter will still be as bad. “Economic recovery will only start by the beginning of next year, but we may only go back to the lower unemployment rates of December 2019 in four to five years.”
Graphic: Costa Makola
Dumisa says in order reduce unemployment, we need to completely change our entire education system to produce people who are appropriately skilled for the economic needs of South Africa.
“South Africans must also start focusing on their own personal economic productivity levels. The days of always demanding salary increases without committing to improving the profitability of their places of work are long gone.”
Peter Attard Montalto, head of capital markets research at Intellidex, says while the official unemployment rate bounced back as expected, the broad stress is still there.
“Today’s unemployment data was important for tracking the underlying nature of the recovery and stresses in the economy. A jump back of 543k in employment was a little less than expected, perhaps indicating the lower labour intensity of the recovery at this early stage.”
He says overall, this crisis has caused 2.3 million jobs to be lost in the second quarter and now 1.8 million lost in the third quarter compared to the first. “This is roughly around expectations and we expect this to fall to around 1.5 million by year end.”
Montalto noted that most of these jobs will be in the informal sector. “Therefore the impact on macro level consumption, given the offsetting impact of Covid-grants, has shielded the impact from retail sales and consumption data.
“However, the scale and scars of the crisis still seem evident. This is why the ending of the Covid grant in January is so important economically and politically with the focus on BIG and the rollout of the employment stimulus scheme.”
Chifipa Mhango, chief economist at the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), says the survey reflects the deepening negative impact of the national lockdown, as well as the overall depressed economic environment across major economic sectors.
He expressed concern about the job-loss trend, because it demonstrates lack of business activity.
“Recent available data for the third quarter of 2020 suggests that the economic scenario remains bleak, following the record GDP contraction in the second quarter of 2020. The manufacturing Purchasing Managers’ Index (PMI) remained mired in contractionary territory in the quarter, as did business confidence, which weighed negatively on investment activity.”
The Congress of South African Trade Unions (Cosatu) says according to its expanded definition of unemployment, the rate of unemployment is sitting at 54%.
“These are the numbers that are to be expected when a government continues to adopt regressive and contractionary policies that only focus on cutting social expenditure and weakening the capacity of the state,” says Sizwe Pamla, national spokesperson.
“Government needs to increase employment using activities in the social economy, especially cooperatives and other activities in the not-for-profit sector. The Federation hopes that government will act with the necessary speed to honour its commitments under the Economic Reconstruction and Recovery Plan. On the 3rd Investment Summit, we want to hear about plans to end the investment strike and create jobs,” he said.
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