Employee confidence recovered in Q4, but business conditions remained challenging.
SA Labour Market Index summary (50,0 = neutral)
The Solidarity-ETM South African Labour Market Index (LMI) increased to 45,2 in Q4 2015 from a downwardly revised 42,0 in Q3 2015 (43,4 in previous release). The LMI is a measure of job and wage security in the South African labour market where 50,0 is the break-even level between rising and falling security.
Although the index has been relatively stable since late 2013, it has stabilised below 50,0 (around 43 index points), indicating a prolonged slump in job and wage security with slow or no real wage growth and retrenchments in some sectors. The LMI has only been above 50,0 for 3 out of 32 quarters since December 2007, reflecting the structural damage done to the job market in the previous business cycle.
The Solidarity Employee Confidence Index (ECI) increased markedly in Q4 2015 to 48,8 from 39,2 in Q3, possibly reflective of some confidence returning due to lack of Eskom power load shedding and lack of large-scale disruptive industrial strike action. Of respondents surveyed, 18% said they felt less secure in their job compared to the previous quarter, considerably down from 32% in the previous quarter’s survey.
The Labour Affordability Index (LAI) improved slightly in Q4 2015 to 38,3 from 36,6, but remained near its lowest level since 2009 with little evidence of a reversal of the negative trend in place since Q1 2014. As long as the economy struggles to grow and companies are beset by higher input costs due to rand weakness, labour affordability is unlikely to improve markedly.
The ETM Business Cycle Index (BCI) fell from 50,4 to 48,6 in Q4. The period above 50,0 which started in Q4 2014 was indeed short-lived. The collapse in the rand exchange rate in Q4 2015 and early Q1 2016 sets up major macroeconomic headwinds and 2016 recession risk is rising. This is likely to weigh heavily on the labour market index.
Note: For a more detailed treatment of the composition of the index and its subindices, see the January–March 2014 edition of the South African Labour Market Report, or the background paper on the index. Both are obtainable on request from the Solidarity Research Institute.