REPORT

Adcorp Employment Index, October 2012

Release date: Monday, 12 November 2012

Salient features Employment increased in October, growing at an annualized rate of 1.0%. During September and October, the economy added 41,971 jobs, partly reversing the decline of 82,431 jobs observed in the four-month period of May, June, July and August. Jobs growth was observed in all sectors, but the informal sector continued to outperform the others, growing at a rate of 2.3% or 12,250 jobs during the month. Strong growth was observed in temporary and agency work (1.2% and 1.4% respectively), which is likely to continue as the economy ramps up for the year-end retail season. The primary and secondary sectors (mining and manufacturing) continued to shed jobs, losing 6,000 jobs between them during the month. The tertiary sectors (mostly services) gained 14,000 jobs during the month. The strongest employment growth was observed in construction (4.7%), financial services (4.3%) and wholesale and retail trade (3.4%). High-skilled jobs continue to outperform low-skilled jobs: professional and clerical (white collar) employment grew 3.0% (or 17,000 jobs) during the month, while low-skilled (blue collar) employment fell by 1.3% (or 6,000 jobs). This month, we take a closer look at the recently released 2011 population census. Unfortunately, there are several important questions including the size and economic significance of the informal sector about which the census provides no clear answers.

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Adcorp Employment Index
110 105 100 95 90 85 80

Adcorp Employment Index (2005=100)

Source: Adcorp Analytics (2012)

Analysis In January 2011, Adcorp began to provide estimates of informal sector employment in South Africa. A considerable discrepancy exists between Adcorps and Statistics SAs estimates. For example, as at the end of March 2011, Statistics SA estimated that there were 2,301,660 informal sector workers in South Africa, compared to Adcorps figure of 6,132,367. The discrepancy attracted a significant amount of attention and Adcorp indicated at the time that the 2011 census would shed some light on the correct estimates. Statistics SA has now released the initial results of the 2011 population census. It was widely hoped that the 2011 census would improve on the 2001 census, which was subject to a significant undercount of the population. The undercount did improve slightly from 17.6% in 2001 to 14.6% in 2011, but the undercount is still significantly higher than for comparable countries where the undercount ranges from 2% to 3%. Surprisingly, according to the 2011 census, informal sector employment amounts to 1,613,078 27.2% lower than the Quarterly Labour Force Survey (QLFS). Far from confirming Adcorps estimates, the census has cast doubt over the QLFS as well. Neither the QLFS nor, now, the 2011 census estimates tie up with other information that we know to be reliable. For example, we know from survey records that, between 2006 and 2011, 440,000 businesses deregistered (i.e. migrated to the informal sector) as a result of the South African Revenue Service (SARS) tax amnesty for small businesses, which netted an additional 385,000 business taxpayers.

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We also know, based on survey records, that the number of people confirming to Statistics SA enumerators that they are planning to start their own businesses fell from 250,000 to 50,000 between 2006 and 2011. Other surveys of small business activity, such as that conducted by The Business Trust, more closely matches Adcorps than Statistics SAs (QLFS or census) data. Statistics SAs estimate of informal sector employment is derived from individuals responses to the QLFS, a questionnaire conducted every three months in which individuals are asked directly whether they work in the informal sector (question 4.17). The Stats SA enumerator is expected to clarify to the respondent that informal sector employment involves employment by a business or private individual that is not registered with government or a statutory body in any way. Additionally, the QLFS asks employers whether their businesses are registered for VAT (question 4.13) or income tax (question 4.14), and how many employees they employ (question 4.16). Unregistered businesses, and registered businesses below a certain size, are counted as being in the informal sector. It is unclear whether this procedure of asking employees and employers directly, not only assuming that they know the correct status of their employment, but also assuming that they respond openly and honestly to the authorities is the best method of establishing the size of the informal sector. It remains our contention that a significant part of economic activity is unrecorded in South Africa, for purposes of evading taxes and avoiding labour legislation, and that this sector employs a significant number of people. Unfortunately the 2011 census sheds no light on these issues. Adcorps latest estimate, for October 2012, suggests that there are 6,374,130 people employed (in the sense of being routinely economically active) in the informal sector, which represents 32.9% of total employment in South Africa. Moreover, the informal sector is the fastest job-creating sector in the economy. Since January 2011, the informal sector has created 184,098 jobs compared to the loss of 26,098 jobs in the formal sector. Finally, the size and significance of the informal sector suggests that South Africas unemployment rate 25.5% according to the latest QLFS, 29.8% according to the census is in fact substantially overstated. Adjusting the unemployment rate for informal sector employment i.e. the various means that individuals employ to make a living without recourse to traditional jobs in the formal sector suggests that the unemployment rate is currently 11.3%.

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Additional Data
Employment by Type Occupation Unofficial sector Official sector Typical (permanent, full-time) Atypical (temporary, part-time) - of which agencies Total * Annualized Employment by Sector Employment Percentage Oct 2012 change vs. (000s) Sep 2012* Mining 287 -16.50 Manufacturing 1,312 -1.83 Electricity, gas and water supply 94 26.09 Construction 511 4.72 Wholesale and retail trade 1,754 3.43 Transport, storage and communication 562 -8.48 Financial intermediation, insurance, real estate and business services 1,664 4.34 Community, social and personal services 2,697 1.34 * Annualized Sector Employment by Occupation Employment Percentage Occupation Oct 2012 change vs. (000s) Sep 2012* Legislators, senior officials and managers 1,119 2.15 Professionals 746 6.47 Technical and associate professionals 1,681 -1.43 Clerks 1,519 5.56 Service workers and shop and market sales workers 1,863 3.88 Skilled agricultural and fishery workers 93 -12.77 Craft and related trades workers 1,399 -1.71 Plant and machine operators and assemblers 1,008 -1.19 Elementary occupation 2,359 -2.03 Domestic workers 846 2.84 * Annualized Employment Oct 2012 6,374,130 12,988,115 9,060,214 3,927,901 1,002,921 19,362,245 Percentage change vs. Sep 2012* 2.31 0.36 0.01 1.16 1.43 1.00