Employment declined in 2Q21

Koketso Mano, Economist at FNB

After a gradual improvement since hard lockdown in 2Q20, employment in the formal non-agricultural sectors of the economy, as shown by the Quarterly Employment Survey, has slowed in 2Q21.

[1] Employment increased by 1 000 jobs (revised up from job losses of 6 000 in the previous estimate) in 1Q21 but declined by 85 000 or 0.9% q/q in 2Q21. Compared to 2Q20 employment gains amount to 61 000 or 0.6% y/y, but employment is still lower than 2Q19 levels, by 653 000 or 6.4%.

Job losses were recorded in the community services (-65 000 q/q), manufacturing (-14 000 q/q), business services (-1 000) and construction (-7 000) sectors, while employment increases were recorded in mining (2 000) and transport (1 000). Employment in trade and electricity were broadly unchanged. Full-time employment declined by 0.3% q/q and 0.2% y/y, driven by declines in business services (-17 000), manufacturing (-16 000) and construction (-11 000). However, full-time employment in community services increased by 22 000. Part-time employment also declined by 5.6% q/q but showed gains of 8.4% y/y. The community services sector shed the most jobs since 1Q21 (-87 000), while business services gained 16 000 part-time jobs.

After a gradual improvement in compensation of employees up to 4Q20, the level of total gross earnings slowed in 1H21. Compared to a year ago earnings have improved by 10.9% and have returned to 2Q19 levels, posting 0.5% growth compared to that period. Only mining and community services had lower basic salary/wage payments compared to the previous quarter, with a contraction of 2.6% and 0.1% respectively. However, all sectors have higher basic wages compared to the same period last year. Overtime and bonuses also improved, by 32.9% y/y, and overall average monthly earnings (including overtime and bonuses) were up 9.7% y/y.

Sectoral analysis
Job losses in a single industry of manufacturing were led by the beverages and tobacco industry (-8.2% q/q) and this follows continuous lockdown restrictions that have impacted the industry. With the fourth wave expected before year end, employment in this industry remains vulnerable, given that resurgent waves of the virus add pressure to these markets and delay already protracted business recovery. Likewise, jobs in the hotels and restaurants industry are lower by 1.9% q/q. Compared to 2Q19 these industries have shed 3.2% and 20.1% jobs respectively.

In the construction sector, civil engineering and building completions shed 3 000 jobs each, reflecting continuous weakness in the sector given subdued demand and constrained profit margins. Lastly, losses in the community services sector were driven by provincial departments, which shed 77 000 jobs and, as previously noted, most of these jobs are on a part-time basis. It is likely that with phase 2 of the Presidential Youth Employment Initiative underway, job gains will be recorded in 4Q21.

Outlook
The expected fourth wave of Covid-19 infections and the slowing momentum in global growth, induced by the Delta variant, pose a risk to domestic output and employment, especially in industries already affected by prevailing raw material shortages. The recovery of the labour market is expected to be protracted, lagging behind economic growth, and recent developments such as the civil unrest may further impede employment prospects. A speedy vaccine roll-out is vital to constraining resurgent waves of Covid-19 infections and the related lockdowns that may limit full operations in the economy.

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