The July To September Quarterly Labour Force Survey

Introduction

This brief is the fifteenth in a series discussing developments in production, the labour market and macroeconomic policy since the beginning of 2020.[1] It discusses the July to September Quarterly Labour Force Survey results in the light of the preceding two surveys[2].

Two questions will be addressed here:

1. Brief 14 indicates that, as far as once can see, output rebounded to a remarkable degree in the third quarter from April lows. How far has employment followed suit?

2. There have been some odd movements in the second and third quarters between those classified as officially unemployed, discouraged workers and other non-economically active people. How are these to be explained?[3]

Employment

On the face of it, the employment rebound has been weak. Table 1 sets out indices of value added and employment in the first three quarters of 2020.

Table 1

Sources:

Value added: Briefs 5 and 14

Employment: QLFS: Q3

But it would be a mistake to base an interpretation on Table 1. The reason is that the QLFS defines employment in the following terms:

Employed persons are those aged 15–64 years who, during the reference week, did any work for at least one hour, or had a job or business but were not at work (i.e. were temporarily absent).

When considering the relationship between value-added and employment, one needs to separate those who worked from those who were temporarily absent from work. This makes a considerable difference as Table 2 shows:

Table 2

The index of employed people who actually worked shows that the decline between Q1 and Q2 was sharper than the employment index in Table 1, but that the rebound between Q2 and Q3 was also sharper. Even so, there remains a gap between the likely value added index and the employment index in Q3. Whether this gap will close or widen in the light of GDP results for the third quarter, scheduled for publication on 8 December remains to be seen. The QLFS for Q4 will also show whether employment shows signs of catching up with value added or not.

Table 2 prompts the further reflection that the Q1 results show that about a quarter of a million employed people were absent from work for standard reasons[4]. The increase of two million in Q2 can be ascribed to the COVID lockdown. By Q3 this excess had reduced to half a million. Between Q2 and Q3, those working had increased by over two million. Most, but not all, of the Q2 furloughed workers not furloughed in Q3 must have returned to work in the third quarter. In addition, there must have been new hires of over half a million.

What will happen to the remaining half million furloughed workers? It is instructive to tabulate all employed persons not at work for other reasons, nearly all because of COVID. Table 3 sets out the information.

Table 3

Employed persons not working for other reasons: Q3

Thousands

From Table 3 one notes:

1. Nearly half of the furloughed workers are employed in the formal community, social and personal services sector. Most of them (211 000) are central, provincial and local government employees. From the point of view of their welfare, there is little too worry about.
2. In eight of the ten sectors, furloughed workers were fewer than 2.5% of the employed. The prospects for their reabsorption will depend on conditions facing the formal enterprises in which they are employed, and the demand for informal sector goods and services.
3. Apart from community, social and personal services, the exception is construction. Why this is so is not yet clear. It may be that construction activity has been a little slower to restart than other sectors.

Unemployment, discouraged workers and other non-economically active

Table 4 sets out the numbers of people in five categories of employment status. This table can be compiled from the Statistical Releases alone.

Table 4

The criteria for placement in each of these categories are:

Employed: See definition above.

Unemployed (official): Not employed in the reference week and either (actively looked for work or tried to start a business in the last four week and available for work) or had not looked for work but had a job or business to start at a definite date.

Unemployed (expanded): The officially unemployed plus the following two categories:

Discouraged work-seeker: Not employed in the reference week and wanted to work and available for work and did not look for work in the last four weeks and reason for not seeking work was any of the following: no jobs available in the area, unable to find work requiring skills of the work-seeker, or lost hope of finding any kind of work.

Other unemployed (expanded): Not employed in the reference week and wanted to work and available for work and did not look for work in the last four weeks and a reason for not seeking work other than any of the following: no jobs available in the area, unable to find work requiring skills of the work-seeker, or lost hope of finding any kind of work.

Other not economically active: Everyone not in the preceding categories: essentially people not working and not available for work.

What happened between Q1 and Q2 was a large net movement of people out of both employment and

unemployment (as officially defined) into both other employment (expanded) and into other not economically active. Between Q2 and Q3 these movements were partially reversed.

Table 5 sheds a little more light on what happened. Most of it represents normal churn in the job market, but the sharp rise on other reasons must reflect the effects of the lockdown. Stated in round figures, about a million people lost their jobs because of it in Q2, over and above the two million furloughed. The reabsorption of those who lost their jobs will be more difficult than the reabsorption of those who retained a link with their employers or businesses. It will depend on the rate of growth in Q4, next year and beyond.

Table 5

Conclusion

The monthly production statistics and QLFS can be tied together with the third quarter GDP results and the Q3 Quarterly Employment Survey when they are published in December. Analysis of Q4 information should be complete by the end of March next year.

Charles Simkins
Head of Research
charles@hsf.org.za

[1]The fourteen preceding briefs are Charles Simkins, (1) Decision making in a time of uncertainty, 11 June, (2) The Adjustment Budget and beyond, 30 June, (3) Has the Supplementary Budget betrayed the promise of a R 500 billion stimulus package? 15 July, (4) Austerity and a permanent income shock, 15 July, (5) The implications of the second quarter Gross Domestic Product data, 11 September, (6) (with Charles Collocott) July production statistics: an indication of a V-shaped recovery? 28 September, (7) The April to June Quarterly Labour Force Survey: a cautionary note, 30 September, (8) The National Income Dynamics Study’s Coronavirus Rapid Mobile Survey: the labour market in the first and second quarters of 2020, 14 October, (9) August production estimates and April to June Quarterly Employment Statistics, 20 October,(10) How coherent are the 2020 production and labour market data? I – The basis for assessment, 4 November, (11) How coherent are the 2020 production and labour market data? II = The main issues, 4 November, (12) Financing government debt, 5 November, (13) The political economy of the Economic Reconstruction Plan, 10 November, and (14) September production, rates of profit and financial flows.