According to Stats SA, the formal (non-agricultural) sector of the SA economy shed a significant 79 000 jobs in Q1 2010; based on today’s release of the Quarterly Employment Survey (QES). This is less than the 171 000 reported by Stats SA in the Quarterly Labour Force Survey (QLFS) that was published in May 2010; also for Q1 2010. However the QLFS survey includes both formal and informal sector jobs, as well as the agricultural and private household sectors. Nevertheless, according to the May 2010 QLFS the economy shed 140 000 formal sector jobs in Q1 2010, which is still significantly different to the QES survey published today. This discrepancy between the QLFS and the QES remains concerning, although the basis for the two surveys are completely different, in that the QLFS is a household survey, while the QES is an industry based survey.
A breakdown of the 79 000 job losses by sector indicates that most of the jobs were lost in retail trade as well as business services (see chart attached). In contrast, the manufacturing, mining and social services sectors all added jobs in Q1 2010. Similarly, over the past year, the formal sector has lost 242 000 jobs, but mostly in business services, manufacturing, construction and retail trade.
It is worthwhile to note that the quarterly data of changes in employment is not seasonally adjusted. The seasonal variation in employment can be very significant, especially in sectors such as retail trade when measured between the final quarter of the year and the first quarter of the following year.
Interestingly, gross earnings of the formal sector fell by 4.6% in Q1 2010, compared with Q4 2009, but rose by an impressive 11.7% over the year to end Q1 2010; despite the job losses. The reason that incomes rose year-on-year despite the job losses is that the average monthly earnings per employee in the formal sector rose by a relatively high 16.4% over the year to end March 2010; from an average of R9 614 per month to R11 195 per month.
There were especially large increase in the average monthly earnings of the construction sector, which rose by 21.5%y/y (including bonus payments), and various social services sectors, up 21.6%y/y (including bonus). In contrast, the average monthly earnings in the trade and accommodation sector rose by a more modest 12.6%y/y.
The sector with the highest average monthly earnings is Electricity, Gas and Water at R23 029 per month, followed by Transport, Storage and Communication at R13 931. The sector with the lowest monthly average income per employee (including bonus) is Wholesale, Retail Trade and Accommodation at R7 331 per month.
Overall, the employment situation in South Africa remains extremely troubling and in a perpetual state of crisis (whether the assessment is based on the QES or QLFS survey) and clearly SA’s number one economic concern. Despite the job losses, household incomes are clearly on the rise and growing well above inflation. Given the latest round of wage negotiations, incomes look set to rise further. The rise in household incomes, coupled with 30 year low interest rates should systematically reflect in increased consumer activity, especially if the job losses are curtailed. Obviously, at the same time the rise in incomes posses some potential upward risk to domestic inflation going into 2011, especially given the low base in inflation that is forming at the moment.
Download the presentation slides