Unemployment shocker: SA is in deep trouble, with worse to come

The latest unemployment figures show SA is in deep trouble that will probably take the best part of the century to fix, economist Mike Schüssler, says after the latest Quarterly Labour Force Survey issued by Statistics SA indicated that unemployment now stands at 34,4%, the highest since the start of the survey in 2008.

“South Africa’s official unemployment rate is now five times higher than the world rate. The number of people without work is far higher than most countries had during the great depression. I would say this is a clinical depression if the other time period was a depression,” Schüssler says.

According to the survey, for the second quarter of 2021, the number of employed people decreased by 54 000 during this time to 14,9 million. The number of unemployed people increased by 584 000 to 7,8 million compared to the first quarter of 2021.

The official unemployment rate increased by 1,8 percentage points from 32,6% in the first quarter, to 34,4% in the second quarter of 2021, while the unemployment rate according to the expanded definition of unemployment increased by 1,2 percentage points to 44,4%.

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1,7 million more unemployed than employed

Schüssler points out that there is now over 1,7 million more unemployed people than people working in the formal sector.

“We can double formal sector jobs and we will still have the average unemployment rate of 6,4% this year, higher than the world average of 6,3% which is considered higher than usual.”

Prof. Jannie Rossouw from the Wits Business School says the high rate of unemployment was to be expected in our under-performing economy. “It is clear that the current policy is not working. We need deregulation and dramatic change. We need a government of national healing that can reset the trust of citizens in government.”

He says the solution is simple: just implement the recommendations of the International Monetary Fund.

“Government must stop regulating everything and replace BEE with BEST, which stands for Black Economic Skills Transfer.”

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Surprising and concerning

Economic consultants, NKC African Economics, say the latest unemployment figures were surprising given the level of economic activity seen during the first quarter of 2021. “We expected the unemployment rate to decline marginally, on the back of a better-than-expected start to the year.”

They find it concerning that unemployment levels worsened before the country endured a third wave of Covid-19 infections and unrest in certain parts of the country.

“As a result of the poor start to the third quarter, the unemployment rate could increase even further. We foresee the job market recovery period to be a lengthy one.”

NKC expects the unemployment rate to recover to pre-pandemic levels of 29,1% only by the third quarter of 2025. During that quarter the unemployment rate should recover to 29.1%.

“For a sustained decrease in unemployment levels, we need to see solid close-to-potential economic growth rates over the coming years.

“For this to materialise, local government will have to get its house in order on various fronts, which, in turn, will help restore investor confidence.”

Shocking figures with more to come

Maarten Ackerman, chief economist and advisory partner at Citadel, says the new figures are shocking, with another knock expected for the third quarter that will include the riots as well as the third wave of Covid-19.

However, he points out, there are green shoots with better figures for construction, trade, agriculture, transport, mining.

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The good news

Prof. Bonke Dumisa, an independent economic analyst, says one major positive figure that many people will miss in this sea of bad news is that there was a net increase of 793 000 in total employment figures in the second quarter 2021 compared to the same period in 2020.

“This is very important to note because it clearly shows the new harsher Covid-19 pandemic related Disaster Management Act Regulations measures and the national lockdown measures in the second quarter of 2020 did more to destroy jobs during that period, which is what many of us warned about, when they were just saying ‘save Lives at all costs’ as they embarked an ‘alcohol sales bans’ and totally shut down most sectors.”