Q4 2014 sees some stabilisation in labour conditions
The Solidarity-ETM South Africa Labour Market Index (LMI) increased to 44,5 in Q4 2014 from 42,1 in Q3 2014. Q3’s reading was upwardly revised from a preliminary reading of 41,7. Note that this measure of job and wage security in the South African labour market sets 50,0 as the breakeven between rising vs falling job security.
The Q4 reading is therefore indicative of an environment of continued falling job security, but where the degree of deterioration is less than in Q3. In other words, the index reflects conditions where there is slow or no real wage growth on aggregate and where some sectors continue to see retrenchments. It should be noted that the index has shown these anaemic employment conditions since the end of 2007 with the exception of the period of Q2 2010 to Q1 2011, when the index averaged 56,7.
The Solidarity Employee Confidence Index (ECI) continued to recover somewhat, up to its highest level since Q1 2014 at 40,9, in comparison with a Q3 reading of 39,3 and a Q2 reading of 33,7. This is consistent with the end of 2014’s protracted mining and industrial sector strikes respectively, and perhaps some relative stabilisation in working conditions after resolution between workers and employers.
Within the ECI, the proportion of respondents who reported satisfactory job conditions (4 or 5 on a scale of 1–5) stood at 52% in Q4, which is unchanged on the quarter although still below a ratio of 57,7% a year ago. The proportion of respondents reporting low levels of job security (1 or 2 out of 5) fell to 16% from 19,1% in Q3.
The Labour Affordability Index remained well below the neutral 50-mark at a reading of 43,4, suggesting that labour affordability remained low. The Q4 reading was nevertheless an improvement from 41,0 in Q3 2014.
The ETM Business Cycle Index moved up to its highest level since September 2012 at 49,1 as part of a recovery from 2013’s lows of 40,4. This is indicative of a South African economy that is experiencing some cyclical relief from a protracted downturn. One should, however, bear in mind that Eskom power shortages pose tremendous risks to South Africa’s growth outlook for 2015 and far beyond.
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 from the Solidarity Research Institute on request.