Stats SA released the long-awaited 2Q20 Quarterly Labour Force Survey (QLFS), shining a light on labour market conditions during lockdown. Importantly, however, Stats SA changed the survey data collection mode from face-to-face collection and replaced it with Computer Assisted Telephone Interviewing (CATI) as a result of the pandemic and restricted movement. This resulted in a reduced sample size and, as such, comparisons with previous quarters should be made with caution.
Nevertheless, data showed an unprecedented decline in the number of employed persons, by 2.2 million to 14.1 million, compared to the first quarter of year. However, and almost counterintuitively, unemployment also declined, by 2.8 million, compared to 1Q20. Combined, these changes resulted in a significant 6.8 percentage point (ppt) decrease in the official unemployment rate from 30.1% in 1Q20 to 23.3% in 2Q20. Needless to say, the fall in unemployment is not a true reflection of the current labour market conditions, but rather a technical issue in the definition of official unemployment. In essence, 5.2 million people fell into the economically inactive category – these were hindered from actively looking for employment by lockdown restrictions (and are thus excluded from the technical definition of unemployed). Importantly, however, the expanded unemployment rate – which is more encompassing and thus more useful under the circumstances – increased by 2.3ppt to 42.0% in 2Q20 compared to 1Q20, reflecting severely weak labour market conditions.
Furthermore, according to Stats SA, while the majority of employed persons continued to receive an income during the lockdown, about one in five of them had a reduction in their pay. In this regard, compensation of employees’ data (released earlier in the month), shows that the total wage bill nominally declined by 7% y/y (or approximately 10% when considering inflation). This was more severe in construction (-22.5%); mining (-19.4); transport (-17.4) and manufacturing (-16.2). These sectors are generally known to absorb large volumes of semi-skilled (and manual) labour and have lower average wages. This shows that the impact of the pandemic has been disproportionately distributed, with lower-income households more severely affected. Indeed, Stats SA estimates that approximately 90% of employed graduates continued to receive a full pay, compared to 75% of those with less than matric as their highest level of education.
Looking ahead, we expect a continued weakening in labour market conditions, possibly extending into 2021. So far, it appears that TERS payments and the government’s support via extended social grants programmes have supported consumer spending. However, these are temporary. This, combined with more pressure on the labour markets, suggests a weak household spending prognosis in the medium term. Nevertheless, low interest rates will continue to provide auxiliary support in the near term.