[ad_1]
According to one analyst, the blows to the body of the United States economy, which has seen jobless claims increase by some 17 million in the past three weeks, is a warning to South Africa.
Former Goldman Sachs director and now Yale chief member Colin Coleman told Fin24 that the possibility of losing 1.5 million jobs locally, or about 10% of the approximately 16 million workforce, is not unimaginable.
South Africa is also struggling against record levels of unemployment at 29%.
Another 6.6 million Americans filed claims for unemployment benefits in the week ending April 4, the US Department of Labor reported Thursday.
This surpassed the record number of unemployment claims filed the previous week: 6.6 million claims, then revised upward by about 219,000 to more than 6.8 million, Fin24 reported. The average for the previous week was revised by more than 54,000 to 2.67 million.
Before the current wave of unemployment, the previous peak was in May 2009, when claims also reached just over 6.6 million.
The United States the workforce reached a maximum of 165.6 million people in February this year, which means that jobless claims in just three weeks exceed 10% of that number, Fin24 reported.
Coleman says the dire cost of the United States economy is a warning shot at South Africa.
“There are different dynamics between the world’s largest economy and that of South Africa. We come from a high unemployment base, but we do not have the fiscal firepower to protect our economy the way the United States has,” Coleman told End24.
Economic mitigation strategies in the United States include interventions such as the $ 2 trillion monetary stimulus announced Thursday morning by the Fed and a $ 2.2 trillion fiscal package approved by US lawmakers.
“That level of fiscal and monetary response is massive, and we just don’t have that firepower,” Coleman explained.
According to Coleman, the possible increase in unemployment in South Africa is likely to occur without significant fiscal mitigation, given the economic slowdown and the resulting shock to GDP growth, which is expected to lead to a contraction of around 6% in 2020.
“South Africa needs a fiscal intervention equivalent to about 5% of GDP, or R250bn,” he argued.
However, there are some measures to mitigate damage for the most vulnerable in South Africa, and some analysts believe that this could stop economic bleeding.
According to Econometrix chief economist Azar Jammine, temporary relief provided through the Unemployment Insurance Fund may prevent the country from seeing the same type of increase in layoff claims as the US. As long as the lockout period does not exceed the fund’s capabilities.
However, the biggest challenge will be access.
“The Unemployment Insurance Fund is apparently suffocated with applications that have difficulty processing. It is a great challenge to try to distribute [R3 000] from one month to 17 million people all of a sudden, “Jammine said.
“That is why some people have been arguing that one of the solutions right now is to expand the child support subsidy or social subsidy or simply increase it because the mechanism is already in place for people to stand in line and get their funds quickly. ” Jammine added.
Jammine said that while the loss of 1.5 million jobs is possible, the escalation may not be as severe.
