When Statistics SA published its Quarterly Labour Force Survey (QLFS) for the first quarter of 2021, it noted that the unemployment rate had increased to the highest level since it started conducting the survey in 2008.
When the statisticians announced the results of the survey for the second quarter of 2021 on Tuesday (August 24), the figures showed that this quarter was even worse and unemployment set a new record.
“The official unemployment rate increased by 1.8 percentage points from 32.6% in the first quarter of 2021 to 34.4% in the second quarter of 2021 – the highest since the start of the QLFS in 2008,” according to the report. “The unemployment rate according to the expanded definition of unemployment increased to 44.4%.”
The severity of the problem
Unfortunately, even the very high unemployment rate hides the severity of the unemployment problem in SA. A look of the gross numbers paints an even worse picture than the Stats SA report admits to.
The total number of persons of working age (defined as people aged 15 to 64) increased by a reasonable 1.5% over the past year, from around 39 million to some 39.5 million, according to the survey.
However, there was a huge increase in the number of participants in the labour market. The active labour force increased by more than 4.3 million people to 22.2 million compared with 18.4 million a year ago.
Thus, the number of people available to do work and who should arguably work, increased by more than 4.3 million in just 12 months. In contrast, Stats SA found that the economy could only create 793 000 new jobs in that time.
“The number of unemployed persons increased by 82% [3.5 million], while the number of persons who were not economically active decreased by 18.2% or 3.7 million,” noted Stats SA.
This big increase in the number of new entrants to the labour market had Stats SA searching for reasons.
The report notes that special tabulations were done to study movements between labour market categories. “It was observed that a large number of persons moved from the ’employed’ status and ‘not economically active’ to ‘unemployed’ categories between the two quarters.”
In reality this means that people lost their jobs, while others who previously didn’t have to work had to start looking for jobs to make ends meet during the recent difficult economic circumstances.
Johannes Khosa, specialist economist at Nedbank Group, says that the newest unemployment figures are another indication of the impact the Covid-19 lockdown has had on the economy.
“Companies remained hesitant to hire more people and, in worse situations, they even laid off more workers,” says Khosa.
“As a result, during the quarter more jobs were lost.”
Impact by sector
Khosa points out that the formal sector shed 375 000 jobs during the quarter to June. Employment in the formal sector fell from just less than 15 million jobs to fewer than 14.15 million.
The worst hit was the financial sector, for decades the sector that created many new jobs and good careers for workers of just about any skill level.
Quarter-to-quarter and year-on-year changes in the formal sector by industry
Stats SA noted that employment gains were observed in a few sectors during the recent quarter compared with the previous.
The informal sector created 184 000 new jobs, the agricultural sector 69 000 and private households 67 000.
However, one can argue that the big increase in employment in the informal sector is being driven more by necessity than anything else.
An analysis of the long-term data supplied as an addendum to the QLFS report reinforces the view that SA is losing the battle against unemployment.
The labour force survey – based on surveying households in SA as opposed to the Quarterly Employment Survey (QES), which polls registered companies – shows that the numbers of unemployed have been increasing steadily year after year since the start of the dataset in 2008.
Population, labour force, employed persons and unemployed persons
The population has been growing steadily. Although data from multiple sources show that SA’s population growth is slowing, the labour force is growing faster due to the specific demographics of SA’s rather young population.
Literally hundreds of thousands of young men and women finish school, university and other tertiary education institutions every year and enter the labour force.
It is immediately noticeable from the graph that the increase in employment lags the growth in the labour force. The numbers of the unemployed continue to increase.
The increase in the unemployment rate tells only part of the story
Stats SA notes that one reason for the recent increase in the unemployment rate is an increase in labour force participation rate.
In short, the number of people who want to work is increasing.
Comparing the number of employed people to the population of people of working age gives a rough indication of the total picture. Expressed as a percentage, it shows that the employment of everybody who could work fell from 46% in 2008 to below 38% in 2021 – whatever the reason for not working.
Employment as a percentage of the working age population
A sharp decline in this ‘overall’ employment is evident after the 2008 financial crisis. Equally noticeable is that this was followed by only a partial recovery. Then Covid-19 hit. Hard.
The future doesn’t require sunglasses. As Khosa says, the outlook for the job market remains poor.
“Subdued economic conditions mean it will take long to repair the damage caused by the lockdowns of the economy.” he says.
“An increase in job creation is not going to happen in the short term. Companies are still hesitant to expand operations.”
Khosa adds that the long-term prospects are not that good either.
He mentions that continued power shortages and uncertainty with regards to government policy will continue to impact on business confidence, economic growth and employment.
Another factor that will keep the unemployment rate high over the long term is that discouraged work-seekers are bound to re-enter the labour market and start looking for jobs once the economy starts to recover.
Stats SA says there are currently more than 3.3 million discouraged work seekers out there.
Destructive impact of Covid and lockdowns
NWU Business School economist professor Raymond Parsons says the new record high of 34.4% in the SA unemployment rate confirms the destructive impact the Delta variant and accompanying lockdown restrictions have had on the economy and the labour market.
“The outlook for the job market remains weak, as it is clear the full impact on economic activity of the civil unrest in late July will only become apparent in the third quarter of 2021. The total economic costs of the recent violence and civil unrest have not yet fully emerged.
“In these negative circumstances unemployment is now indeed the ‘cruellest tax’ on vulnerable sectors of the population and job creation continues to demand top priority,” says Parsons.
“There is, however, no ‘quick fix’. Given the current uncertainties in the economic outlook, the immediate overall job situation is therefore likely to get worse before it gets better.”
Parsons adds that the latest unemployment figures send a message that the balance between lives and livelihoods in handling the pandemic remains an acute dilemma “which needs to be carefully managed” in future.
The availability of labour should be a boon for any economy.
Unfortunately, it seems to be only a problem for SA.
Listen to Ryk van Niekerk’s interview with UIF spokesperson Makhosonke Buthelezi (or read the transcript here):