A stainless steel production line. Picture: REUTERS
A stainless steel production line. Picture: REUTERS

Stagnant performance in formal sector employment during the first quarter of 2020, as reported by Stats SA on Tuesday, is the calm before the Covid-19 storm.

The pandemic and the economic lockdown accompanying it could potentially cause an estimated 1.5-million jobs losses by the end of 2020, according to Business for SA. The group expects the economy to contract between 8% and 10% and take a minimum of two years before it recovers to pre-coronavirus levels.

A recent academic study has, meanwhile, estimated that between February and April alone, 3-million jobs were lost.

The pandemic effects were not yet evident in the quarterly employment statistics (QES) for the first quarter, which tracks formal sector, non-farms jobs.

The QES showed that for the first three months of 2020 SA lost 3,000 jobs — unchanged from the previous quarter. Total employment also remained unchanged between March 2019 and March 2020.

It is in the second quarter that SA is likely to see a plunge in employment due to the pandemic’s economic fallout, Investec economist Lara Hodes said in a note.

The QES is different from the Stats SA quarterly labour force survey (QLFS), as it collects information from 20,000 formal businesses compared to the 30,000 households surveyed through the QLFS. The QLFS also includes agricultural workers; self-employed workers whose businesses are unincorporated; unpaid family workers; and private household workers, according to Stats SA.

The most recent QLFS data, also for the first quarter of 2020, showed that unemployment had risen to 30.1% — its highest level since the series began in 2008.

Even before the current crisis, SA had one of the highest unemployment rates in the world “with weak economic growth, underpinned by structural inefficiencies and policy uncertainty driving the country’s mounting unemployment crisis”, said Hodes. The pandemic has worsened “the dire domestic unemployment predicament significantly as business closures and cutbacks accelerate”. 

The Steel and Engineering Industries Federation of Southern Africa (Seifsa), said it is worried about the quarterly job losses as they reflect businesses continued struggles.

Of particular concern were the declines in industries, such as construction and manufacturing, which both saw jobs shrinking on an annual and quarterly basis.

Before the lockdown, local businesses “were already under strain due to operational, intermediate input, energy or logistics costs”, said Seifsa economist Marique Kruger.

Despite the subsequent easing of the lockdown in June, allowing for the return of important industrial production, including firms in the metals and engineering sector, many companies continue to struggle, she said.

donnellyl@businesslive.co.za

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