Expanded unemployment rate climbs to 43.1% in 2020 Q3

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Lullu Krugel | Partner and Chief Economist | PwC’s Strategy& | mail me


 

 

 

 

 

 

 

 

 


Dr Christie Viljoen | Economist | PwC’s Strategy& | mail me |


Statistics South Africa (Stats SA) reported on 12 November 2020 that employment in South Africa increased by 543,000 in the third quarter of the year – recovering some of the 2.2 million jobs lost during the lockdown-hit second quarter.

The easing of lockdown restrictions enabled more people to return to their jobs, though the increase in working hours were tempered by many South Africans having permanently lost their jobs due to company closures in the second quarter.


Employment recovered to 2013 levels during the third quarter of 2020

Source: Stats SA


The official (narrowly defined) unemployment rate, which dropped to 23.3% in Q2 (a statistical fluke) from a record-high 30.1% in the preceding quarter, climbed to 30.8% in the third quarter.

No job seeking due to lockdown restrictions 

This increase was due to more people being considered unemployed: around 2.9 million South Africans classified as ‘not economically active’ in the second quarter returned to their job-searching activities in Q3 and were reclassified as ‘unemployed’.

Many of these adults were able and available to work during Q2 but were unable to go out searching due to lockdown restrictions on personal movement.

With these statistical issues in mind, it is much more accurate to consider the expanded definition for the unemployment rate – measured at 43.1% in Q3 compared to 42.0% in the preceding quarter.

Nearly three out of four South Africans (74.1% to be precise) aged 15-24 who were available to work were unemployed, with half of those aged 25-34 being without a job.

By any measure these are stark numbers and partly explains why, in September 2020, South Africa experienced the most politically related protest events since the appointment of President Cyril Ramaphosa in early 2018.

On an industry level, eight of the major sectors tracked by Stats SA recovered jobs during the third quarter, with utilities (water and electricity) and transport the only areas where employment continued to decline after the losses seen in Q2.

At the same time, many South Africans were still receiving less remuneration compared to the pre-pandemic period.

For example, Stats SA data indicates that one in five workers with an education up to and including matric received reduced pay during the third quarter. This is similar to the levels seen in the second quarter as well and reflects on the financial hardships faced by companies at present in providing full-pay to people who are still employed.

We expects an additional 250,000 jobs to be recovered in the fourth quarter. Many of these will be seen in the tourism and hospitality sectors.

President Cyril Ramaphosa announced on November 11 that the government is ‘working to enable all parts of the economy to return to full operation as quickly and as safely as possible’. This includes reopening international travel to all countries, subject to the necessary health protocols.

South Africans are also increasingly travelling to local destinations: income earned from hotel accommodation increased from R177 million in July to R365 in August, with the latest number being around 10 times higher compared to May.

Responding to the unemployment challenge

Despite this expected increase in jobs during Q4, it still implies a net loss of 1.4 million employment opportunities by year-end. This will compound the existing challenges seen prior to the pandemic in creating enough value-adding jobs in South Africa.

We recently commented that South Africa’s key challenges – unemployment and inequality – have now become considerably more severe through the pandemic and can no longer be approached in the traditional way. An entirely new approach by the government is needed to resolve this issue.

We have warned that in demographically young economies like South Africa, governments will be faced with chronically high youth unemployment over the full spectrum of education levels.

There are a number of labour-related considerations for governments to address unemployment and adjust to the COVID-19 new normal:

  • Respond quickly to contain the impact – prioritising most vulnerable groups, particularly SMEs who are at risk of business failure and self-employed individuals who may find themselves facing unemployment and underemployment for the foreseeable future, is key.
  • Embrace the current situation – to optimise costs, organisations like governments must assess their internal workforce requirements in terms of resource availability and capacity. Many organisations could be experiencing an increase in underemployment levels and should redistribute and redeploy workers based on the demand and supply of available resources.
  • Advance prospects of success – governments may consider supporting the unemployed in finding work by implementing country-wide job matching portals/programs, partnering with organisations and giving wage subsidies, and providing start-up support for entrepreneurs with difficulties finding capital.
  • Cultivate workforce capabilities – the COVID-19 pandemic has only accelerated the inevitable need to transition to the new normal – remote working, and a more mobile and adaptive economy. There are many skills gaps that arise within the contemporary workforce as new digital trends continue to accelerate the need to enhance digital skills.
  • Transform ideas into realities – sustainable and adaptive long-term strategies will act as the backbone for ensuring a successful and swift economic and employment recovery. While many countries continue to make efforts to diversify revenue streams, this pandemic has highlighted the need to accelerate the transition towards a more self-sustainable economy.

 



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