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Businesses Adopting "Wait And See" Approach


New Zealand companies adopting “wait and see” attitude for hiring staff

Businesses Adopting "Wait And See" Approach 

July 8, 2008 – New Zealand businesses are indicating they will be adopting a “wait and see” approach to hiring in the six months to Christmas, according to a nationwide survey of more than 1,969 employers published by Hudson today.

The Hudson Report: Hiring Expectations, a six-monthly survey of New Zealand companies, shows a positive net effect of 26.8 per cent[1], for the period July to December 2008. Net effect refers to the number of employers expecting increases in staff levels less the number expecting decreases[2].  

The 26.8 per cent result is a decrease of 9.0 percentage points (pp) from the previous period of January to June 2008 and is the lowest level recorded since 2002.

Hudson’s executive general manager, Marc Burrage, said the results reflect marked changes in global and local economic conditions during the first half of 2008.

Businesses are without doubt showing a more conservative approach. However, in spite of significant changes in the global and local economy, the majority of companies are taking a ‘wait and see’ view.

“More than half of employers expect to hold current staff levels steady over the coming six months. And employers intending to increase staff outnumber those intending to decrease staff by more than three-to-one.


“What we are likely to see in the coming months is companies paying closer attention to the quality of the staff they do hire.”




Economic and labour market conditions


Across New Zealand, softening employment expectations in many parts of the economy are being driven to a large degree by slowing conditions in the retail sector and record low levels of consumer confidence. High fuel prices, high food prices, higher interest rates and a weaker housing market are strongly impacting on households and having an appreciable effect on domestic demand. Despite corporate balance sheets on the whole remaining sound, the weaker growth environment is putting pressure on profitability and this is now starting to be felt in employers’ hiring plans[3].


With the unemployment rate remaining at record lows (3.6 per cent, down 0.1 per cent on the previous year), this is providing an apparent cushioning effect for the labour market[4].


Other key findings


·                     By industry. While optimism was down in most industries, industries such as IT remain at record levels.

More conservative hiring intentions are found in the sectors we might expect given the reported performances of these sectors: construction and property, manufacturing and retail.

·                     By region. Auckland and the upper North Island have indicated they are jittery about the climate with declining sentiment across most major industries including financial services and construction/property/engineering.

Wellington has bucked the trend rising slightly on the previous period – government and key private sector industries are holding steady.

The South Island’s confidence is down with sentiment falling across most major industries.

·                     By size. Small businesses continue to be the most buoyant, followed by larger businesses. Medium-sized businesses are finding the current conditions the most challenging.


By industry

While optimism was down in the majority of industries, the IT industry has recorded the highest level of employer sentiment for the sixth consecutive period. While down 4.8 pp on the previous period, optimism among IT employers is exceptionally strong, with a net 55 per cent expecting to increase permanent staff over the coming six months.


Employment expectations for government remained steady at 35.0 per cent, down just 3.0 pp compared to last quarter. Financial services / insurance employers also roughly maintained sentiment, down 3.0 pp to 24.9 per cent.


Professional services declined 21.9 pp to 28.6 per cent, reflecting the general downturn in economic conditions.


The property / construction / engineering industry experienced a decline in optimism of 31.1 pp, with a net 17 per cent of employers reporting an intention to increase permanent staff levels over the coming six months. This was in line with a steep downturn in the housing market and some contraction in non-residential building[5].


Employer sentiment in the manufacturing industry fell 15.1 pp to 9.0 per cent. Manufacturers are feeling the combined impact of the global economic slowdown, flat domestic market, high interest rates and a New Zealand dollar well above historical levels. The outlook for manufacturers may get better in coming months by way of a lower New Zealand dollar, which would see export competitiveness improve[6].


The retail sector reported a 19 pp decline in sentiment compared to the previous period, with a net 28.3 per cent intending to increase permanent staff over the coming three months. High interest rates and price increases for core staples such as food and petrol have had a dramatic effect on household budgets, and retail spending on non food and fuel items has been flat for almost a year[7].


The slowdown in retail trade has been felt in the wholesale / distribution sector, declining 23.9 pp to 18.1 per cent. Reduced freight in the transport sector has similarly led to a decline in employer sentiment, although this effect has been somewhat offset by more domestic passengers on planes, trains and buses[8].


“Wide variation in sentiment is evident across the industry sectors surveyed for the July to December period with uncertainty in the New Zealand economy making itself felt differently in different industries,” Mr Burrage said.


“At the same time, while some industries reported further growth on the expectations reported in our last survey, most indicated a softening of sentiment in comparison to the highs seen in previous periods.”


By region

Upper North Island: Employer sentiment in Auckland and the Upper North Island have indicated they are jittery about the climate and stepped back from the buoyancy seen in previous periods, with expectations declining 15.5 pp from the level recorded for the first half of this year.


A net 19.1 per cent of employers in the region are now expecting to increase permanent staff during the July to December 2008 period.


The IT industry has reported by far the highest level of employer sentiment (48.4 per cent) and is one of only two industries in the region to experience growth in optimism compared to the last survey, the other industry being not-for-profit.


Lower North Island: Wellington and the Lower North Island have bucked the trend, with employer sentiment rising 2.7 pp over that recorded for the first half of this year. A net 38.9 per cent of employers now expect to increase permanent staff levels during the July to December 2008 period, making the region by far the most optimistic.


The IT industry remains a key driver of positive sentiment, with a net 59.4 per cent of employers expecting to increase permanent staff levels over the coming six months. This figure is nevertheless 10.1 pp down on last survey’s result, driven by restructuring in the large IT vendors in Wellington. Skills shortages across the industry remain acute and businesses are continually on the look out for high quality talent.


South Island: Employer sentiment in the South Island has continued the downwards trend started in the first half of the year, with a decline in expectations for the July to December 2008 period of 15.6 pp. A net 23.5 per cent of employers now expect to increase their permanent staff levels over the coming six months.


The IT industry remains buoyant in outlook (61.0 per cent), manufacturing companies continue to express declining sentiment – 16.4 pp on the last survey to 3.6 per cent. The tourism industry remains strong (41.7 per cent) and government is down 10.6 pp from the last survey to 16.7 per cent.


By size

The small business sector continues to make by far the biggest contribution to national employer sentiment, with an incredibly buoyant 41.4% of small business employers intending to increase permanent staff over the coming six months.


Medium-sized businesses appear to be affected most by the uncertainty, with employer sentiment declining 14.5 pp compared to the first half of this year. A net 24.0 per cent of employers are now intending to increase permanent staff over the coming six months.


A net 27.2 per cent of large employers reported an intention to increase permanent staff levels over the coming six months, a decline of 6.2 pp on last survey’s results.


“Previously, large organisations were hiring staff with a view to future needs even when they didn’t need staff immediately. With business expectations now pulling back, large employers are becoming more conservative in their hiring intentions,” Mr Burrage said.


Contracting/temporary overview

In the last survey, contract and temporary hiring expectations declined to 10.4 per cent – a 42.1pp drop from the previous year. For the July to December 2008 period, the downward trend continues with only net 4.9 per cent of employers nationally looking to increase their contracting / temporary workforces – a decline of 5.5pp.

Mr Burrage said these results reflect New Zealand employers’ preference for engaging permanent staff rather than temporary and contract staff.

“Businesses tend to only use the temporary or contract market to get them through a significantly busy period, as an interim measure until permanent headcount is signed off, or to meet the needs of candidates seeking flexibility.”



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