USD/ZAR Analysis:
- SA’s official Q2 unemployment rate at 23.3%, down from 30.1% in Q1
- The unemployment calculation has been positively influenced by the lockdown as many despondent job seekers have been omitted from the calculation
- USD/ZAR[1] had been trading lower after the announcement. Full analysis below
SA’s Unemployment Rate Declines to 23.3%
After having to delay the release of the official and expanded unemployment rate due to Covid-19, Stats SA communicated that unemployment had in fact declined, contrary to expectations of an increase in unemployment.
For all market-moving data releases and events see the DailyFX Economic Calendar[3]
Why the Calculation of Unemployment Matters
The supposed improvements in the labor market is very much a function of the way the unemployment rate is calculated. The unemployment rate is arrived at by dividing unemployed individuals that are still actively seeking employment by the total labor force. The labor force consists of those who are employed and the unemployed who are actively seeking employment).
Unemployment Rate = Unemployed Individuals/Labor Force
However, due to restricted movement under the most stringent period of lockdown (level 5), many who were unemployed were unable to seek employment or less able to seek employment than pre-Covid. The result of this means that they fell outside of the definition of “unemployed” as they were not seen to be actively seeking employment and were therefore classified as “discouraged work seekers”.
Therefore, the flattering figure is not necessarily reflective of the true picture of unemployment when compared to the wider definition of unemployment that considers all unemployed individuals within the working age range. This figure stands at 42% of the population or 10.3 million individuals.
