Festive season yielded no reprieve for unemployment

FNB Senior Economist Siphamandla Mkhwanazi comments on the Labour Force Survey figures for the 4^th Quarter 2019.

Unemployment remained unchanged at 29.1% in 4Q19, the highest unemployment rate since the inception of the QLFS survey in 2008. Disconcertingly, the number of employed people declined by 108 000 in 4Q19 compared to the same period in the previous year. This is in line with weak economic activity and declining corporate profits, but against our expectation of a transitory improvement due to an increase in temporary employment heading into the festive season. This means that the customary uplift in employment during the festive season did not materialise in 2019 (in fact, there was a decline in employment in the Trade sector).

It is also disappointing that the weakness in employment growth is now spilling over to the (non-agricultural) informal sector (-2.8% y/y), which for about three years outpaced its formal counterpart. This helped keep employment above water. This recent weakness could be attributed in part to civil riots and the police crackdown on illicit trade in the country’s major cities in 2H19. The largest job cuts were recorded in Utilities (-10.5% y/y), Construction (-8.8% y/y) and Manufacturing (-2.6% y/y). Notably, job losses in the Finance sector are starting to show in the numbers, with employment in the sector declining by 1.7% y/y for the second consecutive quarter. By contrast, the Transport/Trade (4.7% y/y), Agricultural (4.2% y/y) and Government (4.6% y/y) sectors contributed positively to employment growth in 4Q19. 

Looking ahead, GDP growth is expected to disappoint in 2020 relative to last year, primarily due to the acute energy supply crisis. This will keep employment growth muted, particularly in energy intensive sectors such as Mining and Manufacturing. By extension, this will continue exerting pressure on households’ incomes and their ability to spend.