Following the worldwide loss of 255 million full-time jobs in 2020 — four times more than during the global financial crisis — the International Labour Organization (ILO) warns that we could see a loss of a further 36 million to 130 million jobs worldwide this year. The ILO says that this pain will be unevenly spread between countries and sectors.
The Organization blames unequal vaccine access for a potential jobs bloodbath, as well as the limited capacity of most developing and emerging economies to support the strong fiscal stimulus measures that have characterised the approach of the world’s rich countries to the Covid-induced economic crisis.
The Organisation for Economic Co-operation and Development (OECD) concurs that recovery of the world economy will be uneven and dependent on the effectiveness of vaccination programmes and public health policies. Korea and the United States are reaching pre-pandemic per capita income levels after about 18 months from its onset. Much of Europe is expected to take nearly three years to recover. In South Africa and Mexico, recovery could take between three and five years.
These developments indicate that the global economic recovery is following the K-shaped pattern we have discussed in earlier news flashes. We can expect to see substantial divergence in central bank policies, job growth and equity market performance around the world as countries and sectors recover at different times and paces.
“The weird economic cycle of the global pandemic has crashed into the structural upheaval of the Fourth Industrial Revolution. Global labour markets are right in the middle.”
“Without a deliberate effort to accelerate the creation of decent jobs, and support the most vulnerable members of society and the recovery of the hardest-hit economic sectors, the lingering effects of the pandemic could be with us for years in the form of lost human and economic potential and higher poverty and inequality.”
- The economic fallout from the Covid pandemic is expected to contribute to global unemployment of more than 200 million people next year, with women and youth workers worst-hit, according to UN labour experts.
- In the UK, unemployment fell faster than expected between January and March, according to government data. The figures hint at an economic recovery from the Covid-19 pandemic in the UK as more sectors get ready to reopen. The UK has vaccinated its population faster than most similarly sized countries, with around half of its people having received the first dose.
- In the United States, new jobs data was released today. The US economy added fewer jobs than expected – analysts predicted 650,000 jobs would be added in May. However, there was still a big improvement with payrolls increasing by 559,000 following April’s 278,000 gain. The unemployment rate fell to 5.8% (from 6.1%).
- Janet Yellen, the US Treasury Secretary, is meeting this week with a group of seven finance ministers to secure a broad agreement that would put an end to global tax havens and establish a global minimum tax. According to the New York Times, countries such as Ireland have resisted such a pact for years, but the Biden administration has made it a priority as it moves to increase corporate taxes domestically. Dynasty will be closely monitoring developments in this matter, as most of our offshore unit trusts are domiciled in Ireland and tax neutral jurisdictions.
- On the retail front, Amazon is set to overtake Tesco as Britain’s biggest retailer by 2025. Amazon sales are predicted to hit £77 billion in the next four years, which is £1 billion more than Tesco’s.
- Bitcoin is causing some concern at Ireland’s Central Bank, with its top officials saying the rising popularity of cryptocurrencies is “of great concern”. Bank of England Governor Andrew Bailey has warned cryptocurrencies have no intrinsic value and that people should only buy them if they’re prepared to lose money. This follows a comment by Bank of Japan Governor Haruhiko Kuroda noting Bitcoin’s “extraordinarily high” volatility.
- Following our recent news flash in which we discussed post-Covid demographics, China is set to reverse its long-standing and controversial policy and allow couples to have up to three children. This follows census data showing a steep decline in birth rates. Births in China have fallen for four consecutive years. The country’s total fertility rate — an estimate of the number of children born over a woman’s lifetime — is now 1.3, well below the replacement rate of 2.1.
- For the third consecutive quarter since the Covid-19 national lockdown, unemployment in South Africa has increased. In the first quarter of 2021, it increased by 0.1 of a percentage point, reaching a new high of 32.6%. Statistics South Africa released its Quarterly Labour Force Survey on Tuesday and revealed that around 28,000 people lost their jobs between the fourth quarter of 2020 and the 31 March 2021.
- This picture is likely to be with us for some time. South Africa’s economy is unlikely to recover to pre-pandemic levels before 2025 due to the slow vaccination rollout and low consumer spending, according to the OECD. In addition, Business Maverick reports that “SA’s GDP per capita is 77% lower than the OECD’s best performers, as measured by the population-weighted average of the highest 18 OECD countries. The organisation’s 3.8% South African economic growth forecast for 2021 is more tempered than the above-4% expectations of local economists.”
- Business Maverick also notes that rising domestic demand is a sign of recovery, with the economy’s rebound in this quarter expected to pick up pace. A third wave of Covid could spoil the party, although renewed restrictions announced on Sunday by President Cyril Ramaphosa are so light that the impact on economic activity will likely be negligible at present.
- In a good sign for the manufacturing sector, the Absa Purchasing Managers’ Index recovered from a slight dip in April to 56.2, rising to 57.8 in May. But worryingly, after a surprise surge in April, the employment sub-index is back in negative terrain.
- This comes as new-vehicle sales in May 2021 almost trebled those of May 2020, a month in which the country was in hard lockdown. Figures from the Automotive Business Council/ National Association of Automobile Manufacturers of South Africa shows that 38,337 new cars and commercial vehicles were sold in May 2021 — 197.8% more than the 12,874 in May 2020.
- Questions are being asked about whether the Naspers-Prosus share swap is foolish or ingenious. Business Maverick points out that Naspers is facing some trenchant criticism of its masterplan to crush the discount at which it trades in relation to its constituent parts that has increased to enormous proportions, with one advisory company going so far as to call the plan ‘idiotic’.
- Meanwhile, Prosus has agreed to acquire Stack Overflow, a platform used by software developers, for US$1.8 billion (about R24.4 billion). Prosus CEO Bob van Dijk says Stack Overflow is now one of the 50 most popular websites in the world that has built “a global company and highly engaged developer and technologist community over the last 13+ years”.
- SA’s three largest crypto exchanges – AltCoinTrader, Luno, and VALR – have been approached by the SA Revenue Service as part of a tax risk assessment exercise on SA residents involved in “the mining, speculation and/or investment in crypto assets”.
- An interesting light read from MyBroadband shows how the prices of Big Macs and DStv have changed in the last decade. The article states that the price of DStv Premium increased from R559 to R829 over the last decade while the price of broadband access plummeted over the same period. The price of a Big Mac increased from R19.45 ten years ago to R33.50.
- Finally, on the political front, Stephen Grootes has opined that pressure is mounting on President Ramaphosa to act after more evidence emerged that Health Minister Dr Zweli Mkhize’s ties to communications company Digital Vibes are anything but above board. “There are no simple routes out of the problem for Mkhize, Ramaphosa or the ANC.”
Sources: Bloomberg, New York Times, , Market Watch, Daily Maverick, Moneyweb, MyBroadband, BusinessTech, EWN, Business Insider, BusinessLIVE, Reuters, BBC, etc.