BANKING group Nedbank has revised is jobs bloodbath forecast released earlier this year, citing a heavy dependence of its modelling on Gross Domestic Product (GDP) and the lack of clarity of how many of those who are currently out of employment will be locked out permanently.
Nedbank also seem to have expected a hard Lockdown to be in place much longer than it was till the end of May.
Ahead of Workers Day this year, Nedbank said that 1.6 million jobs were going to be shed this year and it would take over three years for jobs to reach their pre- COVID crisis peak.
In the period ever since, more employment statistics have been released and Nedbank has now revised its grim forecast.
“We now expect around 500 000 jobs to be shed this year and for jobs to reach their pre-crisis peak in the second half of 2023,” the bank said in a research note.
At the end of last month, Statistics South Africa (StatsSA) released the Quarterly Labour Force Survey, which showed that 2.2 million jobs were lost in the second quarter of this year, while a further 2.8 million dropped out of the labour force due to inactivity brought about by the National Lockdown.
This led to the unemployment rate dropping from 30.1% in the first quarter to 23.3 % in the second quarter of this year.
“A decline in employment, accompanied by a larger increase in inactivity other than in unemployment has been observed in most countries across the world, except Canada and the United States of America,” StatsSA said.
“So, the picture observed in South Africa is in line with the rest of the world.”
Nedbank cites two key factors for its changed view.
Nedbank says its employment model is largely based on its view of GDP growth, and because GDP declined significantly by 51 % quarter on quarter on quarter a seasonally adjusted annualised basis in the second quarter, this exaggerated the extent of job losses its model.
“It should be noted that 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, “ South Africa’s Green Bank says.
From its previous forecast of expecting the retail sector to shed 1.4 million jobs,
Nedbank now expects the sector to now lose 132 000 jobs this year.
Manufacturing was previously expected to lose 149 000 jobs, but is now expected to shed 65 000 jobs. Construction was expected to lose 109 000 jobs but is now expected to lose 82 000.
Transport was initially forecast to shed 125 000 jobs, but is now expected to lose 24 000, a reflection perhaps of the opening up of the economy as lockdown has been eased.
The bank then says 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 distinction between permanent job losses and temporary job losses is unclear and so influences forecasts.
Nedbank says COVID-19 presented data collection challenges such that the latest statistics from the Quarterly Labour Force Survey (QLFS) cannot be compared to previous quarters.
The drop in unemployment due to those who have dropped out of the labour force also complicates the picture.
“Not only was this outcome unexpected, but it makes future forecasting very challenging.”
This is because it is hard to tell when the 2,8 million who have dropped out of the labour force will return to it, if at all.
StatsSA has two main employment surveys, the QLFS, which is a household survey and the Quarterly Employment Survey (QES), which is an enterprise based survey.
The number of employed decreased by 13.6% or 2.2 million jobs lost according to the QLFS and by 6.4% quarter on quarter or 648 000 according to the QES over the second quarter.
Nedbank says its model outcome for job losses lies somewhere between these two surveys.
(COMPILED BY INSIDE POLITICS STAFF)