No growth without jobs
Consumers contribute 65% to the United States’ GDP number. It goes without saying that the world’s largest economy needs strong consumers to shake off the ill effects of recession. Before this happens two major trends will have to reverse. The first is a steady slide to higher unemployment, and the second a shift in consumer behaviour from consumption to saving.
The latest US unemployment data brings little hope of a speedy economic recovery. The rate rose marginally from 9.4% in May 2009 to 9.5% in June, only fractions away from the critical 10% level. Kevin Lings, economist at StanLib, recently said a breach of the 10% mark would point to a longer and deeper recession than previously imagined. “This is the highest unemployment rate recorded in the US since 1983, and we still expect it to get worse in the shorter-term,” said Lings.
The US job crisis in numbers
What does the latest unemployment rate mean? Over just thirty days in June 2009 the number of non-farm payrolls fell by 467 000. In other words, almost half a million previously employed individuals have joined the unemployment line. To make matters worse, June 2009 is the 18th consecutive month in which job declines have been recorded. The US economy shed 519 000 jobs in April and 322 000 jobs in May, with the average going back 12 months at 472 000 job losses per month. “The US economy has now shed a massive 5.04m jobs since the beginning of September 2008, which is an average of 536 000 jobs a month!” said Lings. Since the recession started, the world has shed more than 6.46m jobs – the worst performance since World War II.
Should we be worried? Although countries like India and China have avoided recession there’s no doubt the US has to shrug off recession before the balance of the world’s developed economies do the same. South Africa will also be deeply concerned about recent US payroll performance. The job losses point to serious problems in practically every sector of the US economy. Productive sectors such as manufacturing and construction are struggling to stabilise, while service sector contractions point to worrying declines in general commercial activity such as retail trade, finance and business services. Lings noted that only education, healthcare and government sectors showed moderate improvements – further proof that government spending is propping up the ailing US economy.
There is some good news if you dig deep enough. The latest numbers point to an improvement in the “rate of decline” in employment. “This is mainly reflected in the US weekly jobless claims, which appears to be continuing to ease, having moved noticeably lower in the past few weeks,” said Lings. If this trend continues the US economy should hold on to recent improvements in the housing and credit markets.
Meanwhile in South Africa
South Africa’s economic fortunes usually echo those of the US, but with a six to nine month time lag. This time we waited more than a year for our economy to follow the US into technical recession, though most ‘real economy’ indicators pointed to recession many months before Statistics South Africa confirmed a second quarter of negative GDP growth. Unfortunately our employment statistics are only released every quarter – so we’ve had to sit on the benches for three months to confirm that the positive numbers for Q4 2008 were a misnomer.
Over the three months to 31 March 2009 (and we had to wait until 23 June 2009 for Statistics SA to produce these numbers) the South African economy shed 179 000 formal jobs. The number of formal jobs in the economy dropped by 2.1% to 8.333m employees. This dashes the 0.3% quarter-on-quarter rise in the previous quarter. Gross earning for the quarter declined some R15bn to R259bn. The real cause for concern is that job losses occurred across a range of sectors. The manufacturing industry shed 5% year-on-year (y/y), finance, real estate and business services were -0.6% y/y, wholesale and retail trade fell 3.3% y/y, mining -1.6% and the construction industry, much to everyone’s surprise, contracted 2.8% y/y. There were moderate improvements in the electricity, gas and water supply industry and community, social and personal services industry.
I-Net Bridge said that the “Q1 09 Labour Force Survey showed that a total of 228,000 jobs were shed in both the formal and informal sectors.” The decline is likely to accelerate in the second quarter – and one wonders how the ruling party will fulfil President Jacob Zuma’s promise of 500 000 new employment opportunities in the first year of his term.
Editor’s thoughts:
Under current economic conditions jobs are going to be hard to come by. The only way government will create jobs is to buy them, which means funding public sector opportunities at the taxpayer’s expense. Do you have any ideas to address unemployment through recession? Add your comments below, or send them to [email protected]
