It’s hard for SA’s unemployment data to shock a country as punch drunk as SA, but Stats SA’s third-quarter labour force survey has done just that. It shows that the economy shed another 660,000 jobs in the third quarter — not even half of which can be explained by the July unrest.
The steep drop seems at odds with the fact that SA’s economic recovery has been better than expected, suggesting that economists may be underestimating how badly the pandemic, coupled with severe water-and energy-shedding, and rapidly rising input costs, are affecting business.
SA’s official unemployment rate rose from 34.4% to 34.9% in the third quarter — the highest on record — or from 44.4% to 46.6% using the broad definition, which reflects the fact that an additional 545,000 people became too discouraged to look for work.
While SA initially added back many jobs after the first severe lockdown in 2020, the number of employed remains a staggering 2.1-million below the level prior to Covid.
The third-quarter wipe-out was driven by the loss of 571,000 formal-sector jobs. This is way in excess of what most economists were expecting. Stanlib chief economist Kevin Lings, for instance, expected a decline of 200,000 formal jobs, at most.
Less than 10-million people are now formally employed in SA, out of a total labour force of about 22-million, he notes. "Under these circumstances, it’s impossible for any economy to reflect any level of sustained economic success."
So why has the employment data remained so disappointing, even though (prior to July, at least) SA’s economic recovery was bounding ahead of expectations?
Under SA’s first severe Covid lockdown, starting in April 2020, SA lost 2.2-million jobs — a number commensurate with the sudden stop in economic activity. Over the next two quarters, however, an impressive 875,000 jobs were recovered, in line with the initial easing of lockdown restrictions.
"Unfortunately, at that point a few things started to work against SA’s recovery," says Lings.
The first was the start of the second wave of Covid, followed in short order by a prolonged third wave.
Second, key parts of the services sector (including tourism, conferencing, hotels and sporting events) have been unable to resume full operations since April 2020. This, he says, has stunted SA’s overall recovery, despite most of the severe lockdown measures having been lifted.
Third, electricity and water outages are ongoing, undermining the willingness of firms to fully restore business activity.
Fourth, the slow return to the office for many businesses has undermined the commercial property sector. In addition, the July unrest has significantly undermined formal-sector employment, though subsequent rebuilding in the Durban area may yet offset some of this.
KwaZulu-Natal shed 123,000 jobs and Gauteng 200,000 during the third quarter, accounting for about half of the 660,000 jobs shed nationwide on a quarterly basis. But nearly all the other provinces also shed jobs, including the Western and Eastern Cape, which were unaffected by the riots.
Under these circumstances, it’s impossible for any economy to reflect any level of sustained economic success
— Kevin Lings
"The 660,000 fall in third-quarter employment is deeply alarming and cannot sufficiently be explained by the July unrest," says Intellidex’s Peter Attard Montalto.
Economic growth indicators for the third quarter actually held up reasonably well, and survey measures put the employment impact of the unrest closer to the 200,000 mark, he adds. "This suggests that what we are really seeing is underlying weakness in the labour market."
Lings agrees, noting that the underlying fabric of SA’s labour market continues to deteriorate. He thinks several additional factors are at play: most notably, that persistent Covid, as well as ongoing electricity and water problems, have forced more and more smaller companies out of business.
Many larger businesses have also been in cost-cutting mode for some time, with margins being squeezed by rising input costs in an environment of sluggish top-line growth.
"Some of this cost pressure could be resulting in more job losses than we realise," says Lings.
Attard Montalto warns that the dismal employment outlook could be amplified by the political cycle next year, fuelling pressure on the government to boost social spending or even institute a basic income grant.
Right on cue, renewed calls for more debt-fuelled government spending from Left-leaning activists followed the release of the unemployment data last week.
Lings sees the solution rather in raising private-sector business confidence, noting the strong link between confidence, fixed investment and job creation.
Though he feels the political environment lacks the urgency required for dealing with the unemployment crisis, he remains hopeful that, should infrastructural development and policy reform gain real momentum, this could provide a huge boost to SA employment and economic growth.
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