• South Africa’s official unemployment rate fell from 30% to 23% in the second quarter of 2020.
  • This is mostly due to how being “unemployed” is defined.
  • Those who couldn’t look for jobs during lockdown were not counted as unemployed.
  • Also, the sample size for the labour survey was much smaller than usual. 
  • For more articles, go to www.businessinsider.co.za.

Statistics SA released the Quarterly Labour Force Survey for the second quarter – covering the height of the stringent coronavirus local lockdown – on Tuesday. It shows a sharp fall in South Africa’s unemployment rate.

Statistics SA

This is, of course, not right.

The official headline unemployment number fell from 30.1% to 23.3% which is clearly crazy, says Peter Attard Montalto, head of Capital Markets Research at Intellidex.

Here’s how to understand the latest unemployment data:

Define ‘unemployed’

Statistics SA reported that the number of unemployed people fell by 2.8 million, to 4.3 million, in the second quarter.

This is mostly due to its official definition of being unemployed.

To be classified as unemployed you have to be without work and looking for a job, says Sisamkele Kobus, an analyst at fund manager Ninety One.

During lockdown, people couldn’t go out to look for jobs and so, by definition, were not strictly "unemployed".

When asked why they did not look for work, most people cited the national lockdown and the coronavirus pandemic as the main reason for not actively looking for work, confirmed Statistics SA

You also can’t be unemployed – according to the official definition of the term – if you are discouraged and have given up on finding a job.

In addition, people who lost their jobs during the quarter were lumped into the “not economically active” category, which is not part of the labour force, says Kobus.

"People let go from jobs who want jobs are clearly not outside the labour force and hence their [Stats SA's] release is misleading, says Montalto.

There was a massive increase of 5.6 million people who were not officially unemployed, but “economically inactive” for reasons other than being discouraged jobseekers.

(Statistics SA)

If people who lost their jobs were added back into the expanded definition of being unemployed (which also would include people who gave up looking for a job, or couldn’t look for a job during lockdown), then SA’s unemployment rate would be 52.7% - a much fairer reflection of what's going on, says Montalto.

According to Stats SA's own expanded definition of being unemployed, which include those discouraged from looking for a job, South Africa's unemployment rate is 42%.

(Statistics SA)

The number of employed people

Another clue as to the real state of the labour market is the number of people who actually had jobs in the second quarter.

“When you look at the number of employed people, the picture is terrible,” says Kobus.

There were 2.2 million fewer people in employment in the second quarter, a drop from 16.4 million employed people to 14.2 million. Estimates had put that number at between 1.2 million and 1.8 million

(Statistics SA)

According to the data, 25% fewer domestic workers were employed than a year before, 16% fewer technicians, and 12% fewer plant and machine operators. (But 25% more skilled agricultural workers had jobs.)

A smaller group surveyed

Every quarter, Stats SA representatives visit 33,000 households to ask them about their employment status. South Africa’s official unemployment number is based on how many people are unemployed in this group, which has been carefully selected to reflect the broader population.

“I think that in normal times the unemployment numbers are reasonably accurate,” says Josh Budlender, a research fellow at the Socio-Economics Rights Institute of SA, who is currently doing his PhD in economics at the University of Massachusetts. “A survey of 33,000 households is actually pretty large, and statistically speaking is certainly a large enough sample to make inferences about the broader SA population if it is sampled properly – which we think Stats SA does do.”

But in the past quarter, fewer households were interviewed for the survey. Because of lockdown measures, Stats SA representatives couldn’t visit homes. They tried to call the households they previously surveyed, but not all of them could be reached.

“As such, it is tricky to compare this set of results with the previous set as the sample set is not the same and the latest set is not a full sample,” says Sanisha Packirisamy, economist at Momentum Investments.

Accordingly, Statistics SA itself issued the latest unemployment number with a strong caveat.

“Given the change in the survey mode of collection and the fact that [second quarter] estimates are not based on a full sample, comparisons with previous quarters should be made with caution.”

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