Nedbank forecasts that around 500,000 jobs will be lost in South Africa this year, with the country’s labour market only set to reach the pre-crisis peak in the second half of 2023.
The group had originally forecast that the country could lose as many as 1.6 million jobs in an April 2020 report, but has since revised this figure based on recent Stats SA data.
The large difference between the current and initial forecast is the result of several factors, Nedbank said in a research note on Wednesday (21 October).
“Our employment model is largely based on our view of GDP growth – and because GDP declined significantly (-51% q-o-q) in the second quarter, this exaggerated the extent of job losses in our model.
“The relationship between a percentage drop in GDP and a percentage drop in employment was never one-to-one, but because of the outsized influence of GDP in our model, expected job losses were greater than actual job losses in the second quarter.”
The bank said that the current labour environment is such that many employees maintained a ‘job attachment’ and were thus considered employed.
This could mean that an employee is temporarily absent from work because of the pandemic but gets paid partially or in full because the employer deems the impact of Covid-19 on their business as a very temporary supply disruption that will be reversed soon and so does not let go of staff permanently.
The delineation between permanent job losses and temporary job losses is unclear and so influences forecasts, the bank said.
The bank said that there were many anomalies in the official statistics that added complexity to the forecasting process.
“For example, Covid-19 related data collection challenges were such that the latest (Q2) statistics from the Quarterly Labour Force Survey (QLFS) cannot be compared to previous quarters.”
Nedbank said that its initial forecast was based on the historical series and did not consider the current break in the series.
“The QLFS also reported that the unemployment rate in the second quarter dropped to its lowest level since the start of the QLFS, primarily because of a shrinkage in the labour force,” it said.
“Not only was this outcome unexpected, but it makes future forecasting very challenging. This is because insight into when households will return to the labour force in the coming months will be required to make accurate forecasts and this insight can only really be obtained by conducting a household survey.”
Stats SA has two main employment surveys, the QLFS, which is a household survey and the Quarterly Employment Survey (QES), which is an enterprise survey.
From the QLFS you can calculate an unemployment rate, but the same cannot be done from the QES, Nedbank said.
The number of employed decreased by 13.6% (2.2 million jobs lost) according to the QLFS and by 6.4% q-o-q (648,000) according to the QES over the second quarter.