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Unemployment Rate Hits 15 Year Low

UNEMPLOYMENT RATE HITS A 15 YEAR LOW

What Happened?

Statistics NZ released their December quarterly data on the NZ labour market. This is the most comprehensive view of employment and unemployment available with internationally comparable data. Key results from today’s release included the following – all adjusted for seasonal factors where appropriate.

The NZ-wide unemployment rate fell to 4.9% from 5.4% in the September quarter and 5.4% a year ago – the lowest rate since March 1988. The region with the highest unemployment rate was Northland at 8.5%, the lowest Manawatu at 3.8%.

Job numbers rose 0.4% in the quarter and 2.4% from a year ago, a rate equal to average annual jobs growth for the past decade. Construction jobs rose 10.8%, accommodation & cafes 40%, real estate etc. +13.1%, manufacturing -1.2%, farming -4.9%.

In the past year the region with the strongest jobs growth has been Taranaki at 5.9%, the weakest Gisbourne at 0%.

Perhaps signaling that people don’t feel a great need to set up their own businesses, the proportion of the workforce classified as “self-employed” fell to 11.2% from 11.6% the previous quarter – the lowest percentage since June 1991. At 81% the proportion classified as “employees” was the highest since December 1987.

WHY DID THIS HAPPEN?

Jobs growth of 0.4% in the quarter was better than the 0.2% of the September quarter but below trend probably due to employer caution over world events. The surprising fall in the unemployment rate reflected some people leaving the workforce, taking the proportion of the working age population in the labour force to 66.3% from 66.6% in the Sept. quarter. This proportion can fluctuate a lot and in the quarter the only explanation appears to be slightly more than usual people studying and more than usual at home but not looking after kids.

WHO IS AFFECTED AND HOW?

Employers as the data suggest a very tight labour market. Wage and salary growth is likely to accelerate.

Employees as the result suggests good strength to bargain for higher remuneration and conditions.

Economic growth as the low labour availability suggests many orders will not get filled. Interest rates as the low unemployment suggests a mild inflation risk from wages growth and businesses boosting prices rather than output.

Government spending and beneficiary numbers as the result suggests a good environment for people loosely attached to the labour force to gain work. Government labour market policy should focus on this area.

WILL THIS CONTINUE?

We see jobs growth slowing this year to near 1.8% as economic growth overall slows down to near 2.3% from 4.2% over 2002. But the unemployment rate will remain low as net migration gains ease. We see no reason for employers to expect our forecast easing in jobs growth to alleviate the wages pressure which must surely be growing. The structural need for businesses to boost capital expenditure and labour productivity is strengthened by today’s data and that situation is here to stay.

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