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Hiring expectations among employers fall

Hiring expectations among employers continue to fall

June 14, 2006 – Hiring expectations among New Zealand employers have decreased significantly from this time last year, according to The Hudson Report: Employment Expectations released today.

The nationwide six monthly survey of 1,705 Hudson clients shows a positive net effect of 36 per cent [1] for the period July to December 2006. Net effect refers to employers’ expected increase in staff levels less the expected decrease. [2]

The 36 per cent result is a decline of 7.5 percentage points (pp) on the same period last year (July to December 2005), which recorded a six-year high in positive hiring expectations. The positive net effect for the most recent survey period (January to June 2006) was 36.6 per cent.

Hudson general manager, Marc Burrage, said today’s survey reflected continuing cautiousness by New Zealand businesses in taking on employees and was in line with Treasury expectations of muted growth in 2006.

“Feedback from our clients reinforces that employers are more cautious about the future than any of the previous four survey periods. However, 46 per cent of those surveyed thought employment numbers would remain steady over the next six months, which is a similar number to the previous two survey periods.

“With ongoing labour shortages, employers will face continuing difficulty in satisfying their demand for resources.

”The robust performance of the Australian economy is drawing skilled members of the workforce across the Tasman. Further, historically high oil prices are feeding into the consumer price index, which rose 0.6 per cent in the March 2006 quarter. These factors are continuing to exert upward pressures on wage rates making it even more difficult for New Zealand employers to satisfy their demands for labour.”

Other key findings included:

a) Industries that indicated a more positive sentiment than the national average included information technology (54.1 per cent), financial services/insurance (48.4 per cent), construction/property/engineering (47.7 per cent), government (46.3 per cent) and professional services (45.2 per cent).
b) The South Island’s manufacturing sector indicated it expects a decrease in permanent employment levels in the next six months by a net 2.2 pp, 38.2 pp below the national average.
c) There have been large positive movements in the financial services sector, up 13.5 pp on the previous period (January to June 2006) and up 2 pp from the same period last year (July to December 2005).
d) Small organisations recorded a 4.5 pp decrease in positive sentiment when compared to the previous period, with net positive sentiment of 42.7 per cent.
e) There have been large negative movements recorded by several industries including:

• Transport: Down 22.8 pp on the previous period and down 10.4 pp on the same period last year.
• Advertising/marketing/media: Down 17.3 pp on the previous period and down 14.6 pp on the same period last year.
• Tourism: Down 14.2 pp on the previous period and down 17.1 pp on the same period last year.
• Manufacturing: Down 12.3 pp on the previous period and down 13.7 pp on the same period last year.

Employment statistics
The unemployment rate remains low – at 3.9 per cent, according to the latest Statistics New Zealand Household Labour Force Survey (March 2006 quarter). At the time of the release of the January to June 2006 Hudson Report in November last year, unemployment was at 3.7 per cent.

Labour force participation is at 68.5 per cent, the highest ever recorded by the Household Labour Force Survey.

Industry overview
For all industries surveyed, more employers intend to increase staffing numbers than expect to decrease them.

Sentiment in the government sector increased 8.8 pp from the previous period (37.5 per cent to 46.3 per cent). The increase in the net positive result for the government sector was linked to increased certainty in the sector following last year’s election, Mr Burrage said.

“Although there was a decline in new spending in the most recent budget, the effect of previous lifts in funding for government agencies is still being positively felt in public sector hiring expectations,” Mr Burrage said.

The information technology sector is by far the most positive segment of the economy (54.1 per cent). While this is marginally down (1.7 pp on the January to June 2006 survey), the result indicates an extremely positive outlook and is 18.1 pp above the national average.

Other key industry findings included:

• Manufacturing is the least positive industry (11.9 per cent sentiment) and tourism (16.2 per cent sentiment) and transport (22.2 per cent sentiment) had also suffered.
• There was a decrease in sentiment in the advertising/marketing/media sector (15.7 per cent sentiment).
• The most buoyant industry outlook for the Upper North Island was recorded in the financial services and insurance sector, with positive sentiment of 58.9 per cent. Only 4.3 per cent of financial services and insurance businesses surveyed foresaw a decline in permanent employment levels over the next six months. This is the highest level of optimism recorded for the sector in four years.
• In the North Island utilities sector sentiment was 55.6 per cent, a sharp increase on the three prior survey periods, which had recorded an average 46.7 per cent sentiment. The financial services/insurance sector saw an increase (48.4 per cent sentiment), as did the utilities sector (44.4 per cent sentiment).

Regional overview
Positive net effects were recorded across all three regions surveyed.

Upper North Island: The Upper North Island (32.5 per cent) recorded a reduction of 2.8 pp when compared to the previous period, and 11.4 pp when compared to the same period last year. This is the third consecutive period where sentiment has decreased from the previous six month period.

Lower North Island: For the third consecutive period, the Lower North Island recorded the highest level of sentiment (42.6 per cent) and was the only region to record an increase in positive sentiment. This was up 4.3 pp on the previous period but down 4 pp on the same period last year. Lower North Island employers surveyed are weighted towards the government, financial service/insurance, professional services and information technology sectors.

Much of the increase has come from large employers, whose positive sentiment has increased 7.2 pp from 34.3 per cent for the January to June 2006 survey period to 41.5 per cent. The information technology sector experienced the most optimistic result (64.5 per cent).

South Island: The South Island is the least positive region and recorded the lowest level of sentiment (27.5 per cent) in four years. This was a decrease of 9.7 pp when compared to the previous period, or 8.2 pp when compared to the same period last year. The skills shortage coupled with a loss of talent to the North Island and overseas is having an impact in the South Island, Mr Burrage said.

“Some South Island employers have put a hiring freeze in place but they do not envisage much (if anything) in the way of redundancies. However, some industries have been forced to downsize and we have seen closures in industries ranging from food through to manufacturing.”

By organisation size
Small, medium and large employers have all recorded an optimistic outlook for the six-month period July to December 2006. Small organisations (<20 employees) recorded 42.7 per cent, a 4.5 pp decrease in positive sentiment when compared to the previous survey. Medium-sized organisations (20-200 employees) recorded 36.7 per cent, a 1.9 pp decrease, and large organisations (>200 employees) recorded 34.3 per cent, a slight increase of 1.1 pp.

Contracting/temporary overview
Employers have recorded a positive sentiment around hiring contracting and temporary staff of 17.5 per cent. [3] This is 1.6 pp higher than the previous period although a decrease of 1.7 pp from the same period last year. The Upper North Island recorded the highest net positive result at 19.6 per cent, an increase of 7.3 pp over the previous survey although this is a 7.5 pp increase when compared to the same period last year. It is the only region to experience an increase.


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