The good news is that between July and September, the SA economy added back 500,000 jobs lost in the second quarter during the harshest part of the lockdown — a recovery rate of about one in four.
This leaves SA’s net loss of jobs at about 1.7-million, down from 2.2-million in the first quarter, according to Stats SA’s most recent Quarterly Labour Force Survey (QLFS). It means that after the havoc wrought by the pandemic, SA’s official (narrow) unemployment rate is now 30.8% compared with 30.1% in the first quarter, slightly better than many forecasts.
Responding to the QLFS last week, President Cyril Ramaphosa focused on the gain of 500,000 jobs in the third quarter, which he characterised as a "swift rebound in employment" and evidence that "green shoots have emerged as economic restrictions were lifted and the epidemic brought under control".
However, he added: "The true test of our recovery will not be how high unemployment rises in the midst of the pandemic, but how quickly it returns to previous levels and lower."
In this respect, the bad news is that not only has employment in sectors such as manufacturing, retail and catering been devastated, but there is a strong likelihood that permanent economic scarring due to Covid-19, on top of SA’s existing economic fragility, will cause the unemployment rate to keep rising even as the pandemic fades.
Take the manufacturing sector, for example. In the third quarter it managed to recover only 4,000 jobs (1.6%) of the 250,000 jobs it shed in the second quarter, despite a solid rebound in activity. This suggests that much of the damage wrought by the pandemic in this sector may prove to be permanent.
Rand Merchant Bank chief economist Ettienne le Roux is concerned that only about 24%, or 242,000 of the 1.2-million jobs shed in the formal sector during the second quarter, have been recovered so far.
"While this figure should climb further still, the low formal sector absorption rate in [the third quarter] is nonetheless concerning, especially amid lockdown restrictions having been relaxed and real economic activity having bounced back strongly," Le Roux tells FM sister publication Business Day.
"This points to a notable degree of scarring in the wake of Covid-19."
The persistent concern with SA’s level of unemployment is that the number of people with jobs has consistently failed to keep pace with population growth over the past decade, explains Stanlib chief economist Kevin Lings.
And now "the economic damage caused by Covid-19 has exacerbated the weakness in an already fragile labour market".
Lings forecasts that once the dust settles, looking back over a period of 12 months (from the first quarter of 2020 to the first quarter of 2021), SA will have shed about 1.7-million jobs on a net basis, leaving the level of unemployment considerably higher than before the pandemic.
The true test of our recovery will not be how high unemployment rises in the midst of the pandemic, but how quickly it returns to previous levels and lower
— Cyril Ramaphosa
The best way to grasp the ongoing deterioration in the labour market, he believes, is to consider the expanded definition of unemployment. (It avoids some of the technical difficulties that have plagued the official tally during the lockdown period because it counts discouraged work-seekers as unemployed.)
By this measure, SA’s unemployment rate climbed from 39.7% in the first quarter to 42% in the second, and a shocking 43.1% in the third — the highest figure on record.
"This largely reflects the fact that, though the economy added back hundreds of thousands of jobs in the third quarter, the gain was relatively modest in comparison with the increase in the labour force," Lings explains.
The worry is that this trend will continue, given SA’s historically low labour-absorption rate.
In his statement, Ramaphosa stressed several reasons to be more optimistic about the employment outlook, including that parts of the presidential employment stimulus plan are already being implemented, for example the recruitment of teacher and school assistants in every part of the country.
The infrastructure programme is also "already showing tangible results", he said.
Moreover, structural reforms to improve the business climate are being fast-tracked through Operation Vulindlela, a new joint initiative between the National Treasury and the presidency.
So far, more than half a dozen Treasury officials are working in the unit and have begun to engage with private sector experts who have offered part-time support across various network industries, including electricity, water, digital communications and freight transport.
According to the Treasury, it is also engaging with the presidency to institute mechanisms to resolve problems, accelerate progress and hold line ministers accountable for implementation.
"The emphasis of Operation Vulindlela will be on supporting rather than being punitive — the aim of engagement and escalation is to assist with the resolution of challenges, particularly where these are beyond the control of the reform implementer," the Treasury says in response to questions from the FM.
For Neva Makgetla, senior economist at Trade & Industrial Policy Strategies (Tips), the latest unemployment data adds to the growing evidence of a "swoosh-shaped" recovery (like the Nike logo), with a sharp improvement in May and June as the economy moved to levels four and three of the lockdown, but only gradual growth since then.
In a briefing note, Makgetla and Tips researcher Lesego Moshikaro show that over the past six months, informal sector workers have been hit proportionately harder than formal sector workers; those with lower income and education levels have typically fared worse than managers and professionals; and women have generally had it worse than men.
Domestic workers have been among the hardest hit, with 311,000 jobs lost in the second quarter offset by gains of only 116,000 jobs in the third, for a net loss of almost 200,000 jobs over the past six months — a 15% reduction in the original workforce.
Significant differences have also emerged by industry:
- Construction was the hardest hit, losing about a fifth (278,000) of its jobs in the second quarter and regaining only about 5% (14,000) of these in the third.
- Manufacturing was also hammered. It shed 15% of its workforce in the second quarter, or 250,000 jobs, but regained almost none.
- SA’s large consumer-facing sectors, retail and catering, experienced the biggest job losses in absolute terms — about 370,000 in the second quarter. Of these, 200,000 were informal traders. Only about 60,000 jobs were regained in the third quarter, mostly in the informal sector, as consumers stayed away from crowded places despite most legal restrictions on trade having been lifted.
- In contrast, mining employment recovered almost fully in the third quarter, adding back 73% or 46,000 of the 63,000 jobs lost in the second quarter.
- The business services sector, which comprises mostly cleaning and security firms, also recovered relatively strongly. It lost 280,000 jobs from the first to the second quarter, but regained 200,000 jobs (71% of these) in the third quarter.
- As an essential service, agriculture was the least affected sector. In total it shed about 60,000 jobs (7% of its workforce) from the first to the third quarters.
For Makgetla, the employment data points to the importance of maintaining relief for low-income households. She argues that while Ramaphosa’s employment stimulus programme is important, only the Covid-19 special grant and the Unemployment Insurance Fund temporary employer relief scheme reach a sufficiently large number of people to make a real difference.
However, with both programmes about to expire, Makgetla argues that, to build a fair and effective stimulus, "SA should be mobilising other sources of savings, including more rigorous redirection of social security funds and other financial savings as well as more progressive taxation".
In terms of job losses, informal sector workers, those with lower income and education levels, and women have borne the brunt of the pandemic
— What it means:
While conceding that this would impose risks and costs, especially on high-income earners, "sticking with the status quo would impose even greater costs", she says, including an even slower recovery and even deeper inequality.
Lings is hopeful that Ramaphosa’s big infrastructure push could provide a huge boost to employment and economic growth if it gains momentum. However, he believes that the political environment still lacks the urgency required to deal with the crisis.
"Increasing employment has to be the number one economic/political/social objective," he says, adding that it can only be achieved through a sustained effort to raise skills levels and encourage private-sector fixed investment, business development and entrepreneurship.
(There is a strong positive correlation between business confidence and fixed investment, as well as between fixed investment spending and job creation.)
"Improving private sector business confidence on a sustained basis holds the key to fixed investment and job creation," Lings adds. "Trying to lift economic growth and employment without actively endeavouring to improve business confidence will fail to deliver an economic improvement."
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