Labour market outcomes for 2Q21 still reflect overall economic slack

Thanda Sithole, Senior Economist at FNB

As measured by Stats SA’s household-based Quarterly Labour Force Survey (QLFS), total employment fell by 0.4% (54 000) q/q in 2Q21 but was 5.6% (793 000) higher than the same quarter in 2020. To isolate the impact of last year’s lockdown-induced base effect, we look at the level of employment compared to 2Q19, which shows that employment was still 8.4% (1.4 million) lower.

The official unemployment rate increased (the data is not seasonally adjusted) to 34.4% in 2Q21 from 32.6% in 1Q21. The number of discouraged work-seekers rose by 5.9% q/q (34.3% y/y), while the not economically active population declined by 4.1% q/q (25.4% y/y). The expanded unemployment rate remained elevated at 44.4%.
At 37.7% in 2Q21, the employment-to-working age population ratio was still about 4.7% lower than it was in 2Q19, reflecting the ongoing slack in the economy.

Outlook: employment to lag overall economic recovery

We expect employment to lag behind the overall economic recovery amid the continued uncertainty around the pandemic. The renewed global and local supply disruptions alongside a shortage of raw materials and semiconductors, as well as higher shipping costs, imply that uncertainty remains high. This could slow the momentum of the ongoing economic recovery.

South Africa’s real potential growth had persistently moderated from an estimated growth of around 4% before the 2008/09 global financial crisis to around 0.3% in 2019. Potential growth is expected to average around 1.1%[1] over the 2021 to 2023 forecast period. At such a low growth rate, the structural health of the economy remains dire and, as such, the economy will be unable to utilise its labour force productively. As has generally been argued, growth-enhancing economic reforms will need to be implemented to create conditions for a sustainable and higher growth path. This, along with other policy interventions related to reskilling, quality education and improved educational outcomes, should ultimately address the elevated unemployment rate.

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