SA economy sheds 2.2million jobs in the second quarter

The latest unemployment statistics released by Stats SA have left many in South Africa scratching their heads. On one hand, the agency reported a decrease in the unemployment rate to 23.3% in the second quarter, down from 30.1% in the first quarter. However, this seemingly positive news is accompanied by the stark reality that the economy shed a staggering 2.2 million jobs during the same period. To make sense of these seemingly contradictory figures, CNBC Africa invited Annabel Bishop, Chief Economist at Investec, and Jeff Schultz, Senior Economist at BNP Paribas South Africa, to provide insights into the state of South Africa's labor market. Both economists expressed confusion and concern over the unexpected data. Annabel Bishop pointed out the anomaly in South Africa's reporting methodology, which differs from that of other countries. She highlighted that while other nations classify individuals who lost their jobs as unemployed, South Africa categorized them as 'not economically active.' This distinction is crucial, as it resulted in a significant drop in the official unemployment rate. Bishop emphasized that the lockdown measures implemented in response to the COVID-19 pandemic severely restricted job seekers' ability to actively look for work, leading to a distortion in the unemployment figures. Jeff Schultz echoed Bishop's sentiments, noting that the increase in 'not economically active' labor market participants was a significant factor in the decline of the unemployment rate. He explained that the mobility restrictions imposed during the second quarter led to a surge in individuals who were unable to seek employment, artificially lowering the unemployment rate. Schultz cautioned that as the economy gradually reopens and people resume job hunting, the unemployment rate is likely to rise again. Looking ahead to the third quarter, both economists offered contrasting predictions for the labor market. Bishop forecasted a rebound in economic growth, driven by increased job opportunities as restrictions ease. However, she warned that the unemployment rate may spike to around 35% as individuals transition from 'not economically active' to actively seeking work. Schultz painted a bleaker picture, emphasizing the daunting task of recovering the 2.2 million lost jobs. He highlighted the challenges faced by the formal sector, which accounted for a significant portion of the job losses. Schultz stressed the urgent need for policy interventions and investment to revive formal sector employment, cautioning that economic recovery to pre-pandemic levels could take until the first half of 2024. In conclusion, the experts underscored the severity of the economic crisis facing South Africa's labor market and the critical need for decisive policy action to address the challenges ahead. Despite the complexities and uncertainties, both economists agreed on the pressing need to prioritize job creation and economic recovery initiatives to steer the country towards a path of sustainable growth and stability.