Latest horror: 42% jobless

More than 2-million South Africans lost their jobs in the second quarter, bringing into sharp focus the devastating economic blow of one of the harshest Covid-19 lockdowns in the world.

Stats SA, which released results of the Quarterly Labour Force Survey this week, says the total number of jobless people now stands at 14.1-million — essentially one in four of SA’s 60-million population.

The number of people classified as "not economically active" also rose to 20.6-million, from 15.4-million in the first quarter.

Though Covid-19’s unprecedented jobs crisis is not unique to SA, the figures are further evidence that the lockdown has beaten the economy into deep retreat. And it piles more woe on a jobs problem that was of crisis proportions even before the coronavirus hit.

Most strikingly, under the expanded definition of unemployment, the out-of-work rate has now risen to a record 42% from 39.7% in the first quarter. The expanded definition includes discouraged workers, and in this instance, workers with other reasons for not searching for employment — including those stuck at home because of the lockdown.

The jobless rate under Stats SA’s official definition of employment is heavily distorted in this quarter. This definition requires that those who are out of work look for employment, and are available to be hired, to be counted as unemployed. But during the lockdown, most people were prevented from looking for work through no fault of their own — which caused the official unemployment rate, perversely, to decline from 30.1% in the first quarter to 23.3%.

The lockdown caused other methodology problems. For instance, Stats SA was unable to conduct its survey as it usually does. The survey is household-based and data collection is usually done face to face. But because of Covid-19 restrictions, data was collected telephonically, and didn’t include a full sample.

Lumkile Mondi at the Wits school of economics & finance says a more accurate second-quarter "official unemployment rate" is likely about 42%. He arrives at this figure by adding the 2.2-million newly jobless to the number of people who were already unemployed beforehand.

Mondi’s calculation includes people who were furloughed or lost their jobs entirely. And it includes entrepreneurs, especially those in the services sector, which he says has been gutted since the lockdown began.

Mondi says these are long-term job losses that will never be reversed.

"The pandemic has decimated the old ways of doing business and it’s causing a quick structural shift towards the fourth industrial revolution. Many of us are able to work from home. However, this is a completely different way of doing business. And fewer of us will find employment in this environment."

In the absence of decisive leadership, he warns, SA is likely to keep shedding jobs for a while. SA’s economic weakness, he says, is exacerbated by the state’s lack of urgency in implementing a proper recovery plan. And SA’s unstable electricity supply will undermine growth prospects for at least another three years.

By the end of 2020, Mondi expects SA’s official unemployment rate to be between 42% and 45%.

Nedbank economist Busisiwe Radebe says the figures reveal that too many people have dropped out of the labour force — which means SA’s recovery is going to be harder and longer than anyone expects.

"The chances of a V-shaped recovery are probably out of reach and the economy will need some form of further stimulus," she says.

The Reserve Bank, by keeping rates on hold, has also signalled that it has done as much as it can.

This means, says Radebe, that only structural changes can put the economy on a better footing.

This quarter’s job losses were across the board: formal sector employment decreased by 1.2-million in the quarter, while the informal sector shed 640,000 jobs.

No sector was spared.

Those that recorded the worst losses were community and social services (515,000), trade (373,000), private households (311,000), finance (283,000), construction (278,000) and manufacturing (250,000).

Nor was it entirely rosy for those who kept their jobs. Statistician-general Risenga Maluleke says nearly one in five employed people had their salaries cut in the quarter.

"Of the 14.2-million who were employed in the second quarter of 2020, more than half were expected to work during the national lockdown," Maluleke says.

About 17% indicated that they worked from home.

Thankfully, says Investec chief economist Annabel Bishop, many people received payments from the Unemployment Insurance Fund and other government assistance during the quarter, which reduced the strain on households. In another peculiarity, this allowed individuals to be classified as "not economically active", while still receiving some form of income.

While the 2.2-million new job losses were not included in the narrower definition of unemployment, they were included in the 42% figure of the expanded definition.

Echoing Mondi, Bishop believes that if those 2-million were counted under the narrower definition, this rate would have rocketed to 45%.