Labour Market Strong Despite Unemployment Rise
For those without economics degrees this is a simple guide to something significant which happened in the world of economics today that has relevance to the person on the street.
Statistics NZ released quarterly data giving the most accurate up to date picture of the state of the NZ labour market – the Household Labour Force Survey. The survey showed a small rise in the unemployment rate in the March quarter to 5.0% from a 15 year low of 4.9% in the December quarter and 5.3% a year ago. Job numbers grew by a mild 0.5% during the quarter taking annual growth to 1.5%. This is below the average for the past ten years of 2.5% per annum.
WHY DID THIS HAPPEN?
The unemployment rate rise is essentially lost in the standard statistical error with jobs growth in the quarter of 9,000 seasonally adjusted almost the same as labour force growth of 10,000. The result of 5% unemployment is actually quite good and the rate would in fact have fallen had growth in hours worked of 1.9% fed into extra jobs rather than more overtime.
The slowing in jobs growth to 1.5% on a year ago from 3.5% a year earlier occurred mainly in agriculture, -4.4% for the year, manufacturing –4.9%, transport –2.2%, education –1%, finance –3.9%. Best growth was in accommodation +13.8%, construction +14.4%, mining +60%, health +5.5%.
Of interest and reflecting the tight labour market, a record 89.5% of all unemployed left their last job voluntarily.
WHO IS AFFECTED AND HOW?
Retailers as the data suggest recently growth in hours worked if not jobs has been firm and therefore spending power has grown. House builders as rising income underpins construction along with real estate turnover and house prices. Interest rates because the firm result with low unemployment suggests only another 0.5% may need to be cut from the cash rate this year to underpin the economy – though jobs growth can lag overall economic growth so this factor is not compelling. Employers because the data show little easing in the tight labour market as yet. Wages pressure remains upward. Exporters because the firmish result overall will tend to underpin the already strong NZD. WILL THIS CONTINUE?
The economy’s growth rate is slowing meaning the need for businesses to hire people is declining. Depressing factors include
the higher exchange rate hitting exporters,
weak trading partner growth
advertising numbers seasonally adjusted fell slightly in
February and March. However skilled and unskilled labour
remain in short supply in NZ. This situation will ease only
slightly this year and we expect many businesses to either
hoard valuable people through the period of weak growth,
and/or take advantage of any rise in unemployment to get
more skilled people into their workforce. A year from now we
see the unemployment rate having increased further to near
5.6% and jobs growth close to or just over the 1.5% just
recorded in the year to March.