SA eliminated 2.2 million jobs in the second quarter

Risenga Maluleke, General Statistician and Chief Statistician of South Africa (Stats SA), explains: “The official unemployment rate is calculated using the number of employed and unemployed people, and does not include discouraged job seekers.”

He said the expanded unemployment rate increased by 2.3 percentage points in the second quarter. “This reflects the fact that people were available for work but were not actively looking for work.”

The loss of jobs followed the implementation of strict restrictions to slow the spread of the Covid-19 virus, which put the economy in its longest recession in nearly three decades. Most South African companies were forced to close for five weeks and many were forced to cut staff.

Not a true reflection

Economists warn that published unemployment statistics paint the wrong picture of current trends in the workforce.

According to Dawie Roodt, chief economist at Efficient Group, people who are not seeking employment due to lockdown restrictions cannot be classified as discouraged workers.

“We are currently in very volatile circumstances and any number [released] it is more likely to give us an incomplete picture of what is actually happening [in the labour force]. We will probably have to wait a couple of months or quarters before we can understand the underlying trend caused by the lockdown. “

“We have seen a massive increase in the number of people who just sit at home doing nothing. They are not officially unemployed and are not even discouraged because they are not allowed to leave their places of residence. This drop in unemployment gives us the wrong picture, ”said Roodt.

He said it would be better to look at the Labor Force Participation Rate, which collapsed less than 50% in the second quarter.

Another Citibank economist, Gina Schoeman, explains that the reason unemployment statistics declined is due to a drop in the workforce.

“It is a function of the number of unemployed people over the labor force because the number of people looking for work dropped dramatically. You can also see that companies were not hiring through the number of employed people in the population, since that absorption rate dropped from 42% to 36%, ”said Schoeman.

She says these published numbers show that people’s fear of contracting the virus has kept them from looking for work.

Investec chief economist Annabel Bishop said these figures are expected to rise in the third quarter as lockdown regulations have been relaxed.

She explains that as people become more economically active, the unemployment rate goes down.

“The most important point is that we estimate that the unemployment rate would have been 45% in the second quarter if the newly unemployed in the second quarter had not been seen as ‘not economically active’ and instead were still part of the workforce as they normally are. . Therefore, today’s data is not consistent with Q1 2020 or any other historical period, ”Bishop said.