Dreams of Covid recovery dashed by rising unemployment

Employment recovered slightly at the end of 2020. But the rate of job recovery has not been enough to stem the tide of rising unemployment, which has reached crisis levels.

According to Statistics South Africa’s quarterly labour-force survey, the unemployment rate reached 32.5% in the last months of 2020. This is the highest unemployment rate since the survey began in 2008.

The much-anticipated survey results provide a picture of how employment has fared through the Covid-19 economic crisis into recovery. In the first months of the lockdown, 2.2-million South African lost their jobs. But the country’s deepening unemployment crisis was already cause for concern before the Covid-19 jobs bloodbath.

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Despite earlier indications of South Africa’s economic recovery, there were still almost 1.4-million fewer people employed in the last quarter of 2020 than in the same period in 2019.

The survey, released on Tuesday, found that the number of employed South Africans increased by 333 000 to 15-million in the fourth quarter of 2020. However, the number of unemployed people also increased by 701 000 between the third and fourth quarters. And the number of discouraged work-seekers increased by 235 000. 

Although the number of economically inactive people decreased between the beginning of the lockdown and the end of 2020, this was not enough to offset the levels of economic inactivity triggered by the lockdown.

According to the survey, employment increased in all sectors and industries, except for finance and mining. However, compared to the last quarter of 2019, employment contracted in all industries. 

More questions relating to lockdown work activity were added to the fourth-quarter questionnaire. The survey found that of the 15-million people employed in the quarter, 78.3% were expected to work during the national lockdown, while 88.9% continued to receive pay during the lockdown.

According to the survey, 16.5% of those receiving a salary during the lockdown had their pay reduced. 

There seems to be some relationship between education and reduction in pay, the survey notes. Those with higher education levels had higher chances of receiving a full salary than those with lower levels of education in both the third and fourth quarters of 2020.  About nine in every 10 employed graduates (90.2%) continued to receive full salaries, compared to 81.2% of those with less than matric as their highest education level in the last quarter.

The survey’s release comes the day before Finance Minister Tito Mboweni’s tabling of the 2021 budget, which will give the country a picture of the state of the fiscus after a devastating year for the economy.

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Analysis by PwC shows that under the baseline economic growth scenario, South Africa’s economy will add only 467 000 jobs in 2021. The baseline scenario sees employment returning to pre-pandemic levels by 2024.

“South Africa already faced significant challenges with poverty, inequality and unemployment prior to the Covid-19 pandemic with an unemployment rate among the highest in the world,” the PwC analysis reads. 

“To avoid further exacerbation of these challenges, South Africa’s economic recovery needs to be robust. Budget speech 2021 could establish a foundation to support this economic recovery.”

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