More damage to South Africa’s labour market as unemployment hits new high

SA’s official unemployment rate hit a fresh high in the fourth quarter of 2020, with signs emerging that even though Covid-19 lockdown rules were substantially eased during the period, the country’s labour market faces permanent and worrying damage.

Although many sectors of the economy were open during the fourth quarter, which paved the way for economic activity to pick up and unemployed people to search for jobs, SA’s unemployment crisis continued to worsen.

The crisis – aggravated by a Covid-19 lockdown that is nearly a year old – poses a headache for President Cyril Ramaphosa’s government, which is arguably bereft of ideas on how to create jobs, while balancing efforts to grow the economy and manage a deteriorating fiscus.

According to Statistics SA, the country’s official unemployment rate during the fourth quarter of 2020 rose by 1.7 percentage points from the previous quarter to a record high of 32.5%. In other words, the number of people who joined the unemployment queue in the fourth quarter increased by 701,000 – bringing the number of unemployed people in SA to 7.2 million.  

Statistics SA said the official unemployment rate of 32.5% is the highest since the data collection agency began measuring unemployment trends in 2008 through a redesigned survey called the Quarterly Labour Force Survey.

The latest unemployment figures suggest that the Covid-19 lockdown has made it more difficult for job seekers to find an entry point into the labour market and for struggling businesses to create employment.

The figures also indicate that the number of jobs lost due to the lockdown won’t bounce back as robustly, because SA’s economy is still in the doldrums, low business confidence is persisting, and the government isn’t moving with speed to implement pro-growth structural reforms. 

Compared to a year ago and factoring in the impact of the lockdown, total employment decreased by 1.4 million and the number of unemployed people increased by 7.5%, according to Statistics SA.  

Economists and market watchers will probably dig deeper into unemployment trends by looking at the unofficial unemployment rate or expanded definition of unemployment, which includes discouraged job seekers who have given up on looking for jobs. The unofficial unemployment rate decreased by 0.5 percentage points to 42.6% in the fourth quarter.

“The numbers are absolutely horrible,” Dawie Roodt, the chief economist at Efficient Group, told Business Maverick, adding that the outlook for economic growth is weak, which suggests that “unemployment levels will remain high and will likely increase further in the future”.  

“The outlook for SA in terms of job creation is not that good.The right approach to getting more jobs is to grow the economy, which will lead to more jobs.”

The South African Reserve Bank (Sarb), National Treasury and other industry players expect GDP for 2020 as a whole to fall by more than 7%, the economy’s worst contraction since the Great Depression of the 1930s. But, leading to 2023, Sarb expects fluctuations in economic activity; the economy is forecast to expand by 3.6% in 2021 and 2.4% in 2022. This level of economic growth is not enough to make a dent in SA’s unemployment numbers.

Although the number of discouraged job seekers during the fourth quarter increased by 8.7% or 234,000, people that are considered to not be economically active decreased by 1.1 million (or 7.4%). Some economists have previously argued that data collection by Statistics SA continues to be distorted by the Covid-19 lockdown, as it is difficult to track when people move from the “discouraged job seekers” category or the “not economically active” category. The ability of people to travel and search for jobs when lockdown rules are eased can distort the movement of people in different categories.

Industries that have shed the most jobs include finance (123,000 jobs lost) and mining (35,000). See graph below.

Source: Statistics SA fourth quarter 2020 Quarterly Labour Force Survey.