Markets Daily: A glimpse of the covid-19 shock to jobs and more to come

Today at 11:30 Stats SA will release the Quarterly Labour Force Survey (QLFS) statistics for unemployment for the second quarter of 2020, which will give us a first formal tally of jobs destroyed by the impact of the lockdown on the economy. We expect the unemployment rate to have increased to 34%, slightly below the Bloomberg consensus expectations of about 35%. The range of forecasts spans from 31% to 50% unemployment rate, which is an indication of the uncertainty surrounding the estimation of labour statistics as a result of the pandemic.

The services sectors such as tourism, trade, construction and manufacturing will likely show bigger job losses compared to some sectors that cold operate with people working from home or that were deemed essential services such as agriculture and financial services.

There are also some added differences that we need to be aware of in interpreting the data. The QLFS is a household survey of employment characteristics, which is usually done face-to-face by Stats SA field agents, however, due to restrictions imposed by government to control the spread of covid-19, Stats SA changed its methodology for conducting interviews to Computer Assisted Telephonic Interviews.

It will be crucial to get an understanding of response rate of households in this survey relative to the in-person interviews. Behaviourally, it should not be surprising if the data shows a lower response rate compared to previous surveys. To what extend this would impact the figures remain uncertain.

Going forward, there will be those job losses that would be temporary as the economy recovers but there will be some that are gone for good as companies restructure to remain resilient. There will also be shifts across sectors where some sectors have become more essential than others. The figures to be released today by no means represent a peak in the unemployment rate as we expect credit risk to rise and ultimately liquidations and insolvencies to also increase. The next few quarters will likely show further jobs losses as companies complete legal proceedings to wind down, which usually takes some time to complete. Whatever the number is, the worst is yet to come.

Best regards

Isaah