Confidence among NZ employers drops further

Confidence among New Zealand employers drops further, according to latest Hudson Report

April 2, 2009 – The hiring expectations of New Zealand employers has dropped further, according to the latest Hudson Report. While three-quarters (76.4 per cent) of employers intend to increase or hold their current staff levels steady, 24 per cent intend to reduce permanent staffing levels during the April to June 2009 quarter.

The Hudson Report: Hiring Expectations, a survey of New Zealand organisations shows a net effect of negative 11.3 per cent for the period April to June 2009. Net effect refers to the number of employers expecting increases in staff levels less the number expecting decreases.

This result is 19.2 percentage points lower than that recorded in the previous Hudson survey and is the lowest level recorded since the survey began in 1999.

“With cost and demand pressures on businesses mounting, some employers have had to rapidly reassess their workforce strategies. We are seeing some employers talking to their employees about reductions in salary levels or offering flexible working practices, such as job sharing, to help retain the talent they’ve worked so hard to develop while also addressing the current financial challenges they face,” said Marc Burrage, executive general manager at Hudson.

Economic and labour market conditions
The New Zealand unemployment rate has risen to 4.6 per cent in the December 2008 quarter from 4.2 per cent the previous quarter, and up from a low of 3.4 per cent a year ago.After four consecutive quarters of negative growth, culminating in a 0.9 per cent contraction in the December 2008 quarter. Forecasts are for another two or three further quarters of negative growth, with the unemployment rate predicted to continue rising for at least the next 18 months.

Other key findings
• By industry. The continued decline in employment expectations has been felt across the industries surveyed nationally and most industries are now reporting negative sentiment. The worst affected industries are tourism and hospitality (negative 43.8 per cent), manufacturing (negative 32.2 per cent), retail (negative 28 per cent), telecommunications (negative 25.4 per cent) and wholesale (negative 18.2 per cent).
• The education, healthcare (non government), information technology and non-profit sectors are still in positive sentiment
• By region. Employer confidence continues to fall sharply across the regions, with all regions now reporting negative sentiment. Sentiment in the Upper North Island is the lowest nationally, falling 18.7 percentage points to -15.9 per cent. A net 12.0 per cent of employers in the South Island intend to reduce permanent staff, down 12.3 percentage points. Lower North Island employers reported a 20.3 percentage points fall in sentiment, although employer confidence is in a better position than the other regions at negative 2.4 per cent.
• By size. The outlook among larger businesses has dropped the most significantly (by 23.1 percentage points). While sentiment among small businesses employers has declined, although overall the sector remains positive.

By industry
Sentiment in the IT industry experienced a sharp decline of 28.4 percentage points, although still remains positive with a net 7.8 per cent of employers intending to increase permanent staff over the coming three months.

Employer sentiment in the construction/property/engineering sector has dropped by 21.8 percentage points compared to the previous Hudson survey to negative 15.8 per cent. Investment in residential construction dropped 14.0 per cent in the December 2008 quarter into its fifth consecutive quarter of contraction. By September this year, residential construction activity is expected to fall to less than half the level recorded during its peak in September 2007. With commercial construction faring little better, construction and engineering companies are now looking to the Government’s planned investment in public infrastructure to generate activity over the medium term.

In the government sector, employment expectations have declined 21.0 percentage points. Many departments are in the process of restructuring and the majority of public sector employers are looking to deliver services with existing staff. A net 6.3 per cent of public sector employers are now planning to reduce permanent staff over the coming quarter.

The manufacturing industry experienced a further 16.7 percentage points drop in sentiment following the sharp drop earlier this year, with a net 32.2 percentage points of employers expecting to decrease permanent staff over the coming three months. Reduced export orders, the impact of the dollar and increasing pressure to move production offshore is prompting a number of manufacturing businesses close down or shed staff to contain costs.

Employers in the professional services industry have reported a dramatic 27.7 percentage points drop in confidence following sharp falls over the previous two surveys, with a net 15.1 per cent now intending to reduce their permanent staff levels. Firms that have been able to redeploy consultants from areas focussed on business growth towards risk and insolvency services have been better able to manage the downturn and retain staff.

In the financial services/insurance industry, employer sentiment has declined a further 12.0 percentage points. Sentiment has now moved into the negative, with a net 9.4 per cent of employers reporting an intention to reduce permanent headcount.

Employer confidence in the retail sector continues to become more negative as consumer spending remains flat despite tax cuts, falling mortgage rates and lower petrol prices. A net 28.0 per cent of retail employers now expect to reduce permanent headcount, a further 17.2 percentage points decline from that reported earlier this year.

With the lack of consumer demand filtering back through the supply chain, sentiment in the wholesale/distribution industry fell a further 12.1 percentage points, with a net 18.2 per cent of employers now planning to reduce permanent headcount. Sentiment amongst FMCG employers declined a further 8.2 percentage points to negative 8.2 per cent, while advertising/marketing/media employers reported a 17.0 percentage points drop, taking confidence to negative 17.0 per cent.

Employer in the telecommunications industry reported a sharp fall in sentiment for the third consecutive survey, falling 27.9 percentage points from earlier this year. Sentiment is now deeply negative, with a net 25.4 per cent of employers planning to reduce their permanent staff levels over the coming three months.

A net 17.2 per cent of employers in the transport industry reported an intention to reduce permanent staff levels over the coming three months, down 29.1 percentage points from the result reported in our last survey.

By region
Upper North Island:
Employer sentiment in the Upper North Island has moved into the negative, with a net 15.9 per cent of employers expecting to reduce permanent staff levels during the coming three months. This represents a considerable 18.7 percentage points decline on the previous Hudson survey and is the lowest level of employer sentiment nationally.

Employer confidence in the construction/property/engineering industry has dropped a further 28.6 percentage points after falling continuously since mid-2008. Many construction and engineering companies are waiting for Government infrastructure projects to come through.

Employer sentiment in the IT industry has fallen a further 22.4 percentage points following the sharp drop reported earlier this year, with a net 2.2 per cent of employers now planning to reduce their permanent staff levels. This result is not as negative as other industries, with essential in-house teams and outsourced business-as-usual services remaining in place.

In the telecommunications industry, employers reported a 37.5 percentage points decline in sentiment with a net 25.0 per cent intending to reduce permanent headcount over the coming three months.

In the professional services sector, a net 22.6 per cent of employers expect to reduce their permanent staff levels over the coming three months, a further 21.4 percentage points drop from the previous result.

The manufacturing sector continues to decline, with a net 33.6 per cent of employers now planning to reduce their permanent staff levels.

Conditions in the retail sector continue to deteriorate, with employer sentiment falling a further 13.2 percentage points. A net 29.0 per cent of employers are now expecting to reduce permanent staff levels over the coming three months.
Sentiment in the transport industry dropped sharply by 46.2 percentage points, with a net 20.0 per cent of employers reporting an intention to reduce their permanent staff levels over the coming three months.

Lower North Island:
Employers in the Lower North Island have reported the sharpest decline in sentiment nationally. Down a considerable 20.3 percentage points from the result reported in the previous survey, employer sentiment has now moved into the negative with a net 2.4 per cent of employers planning to reduce their permanent staff levels during the April to June 2009 quarter.

“Driving the downturn in hiring intentions throughout the region is the change in behaviour in the public sector as the new Government shapes up its plans to increase efficiency, while increasing public investment to stimulate the economy,” said Mr Burrage.

The IT industry has reported a dramatic 46.7 percentage points drop in employer sentiment as employers feel the impact of cost cutting in the public sector together with the reduced investment in IT more broadly. Nevertheless, a net 12.2 per cent of employers are still planning to increase permanent staff levels in areas where specialist skills are needed.

Sentiment in the professional services industry has fallen 38.5 percentage points, with net zero per cent of employers intending to increase permanent staff levels over the coming quarter. This result is largely driven by reduced demand from Government for consultancy services such as lawyers, accountants and management consultants, with Government having restricted its expenditure on external services to the bare minimum.

Employer sentiment in the telecommunications industry has dropped a further 25.2 percentage points following a significant decline earlier this year, as restructuring and rightsizing in the industry continues. Sentiment is now deeply negative with a net 28.6 per cent of employers planning to reduce permanent headcount over the coming three months. The Government commitment to high speed broadband will provide opportunities for the industry going ahead, but it remains to be seen how much impact this has on hiring intentions.

The financial services/insurance industry has reported a 1.1 percentage point rise in sentiment, with a net 4.6 per cent of employers planning to increase permanent staff levels over the coming three months. This result follows a sharp drop in employer confidence earlier this year when employers were heavily restructuring in response to the global financial crises.

South Island:
Employer confidence in the South Island has fallen a further 12.3 percentage points as local businesses respond to the sustained downturn in domestic and international conditions. Employment expectations are now negative, with a net 12.0 per cent of employers reporting an intention to reduce their permanent staff levels during the April to June 2009 quarter.

The Canterbury region continues to suffer heavily from the recession in global manufacturing, with reduced export orders, the impact of the dollar and increasing pressure to move production offshore seeing a number of manufacturing businesses close down and many shedding staff or reducing hours in an effort to contain costs. Employer sentiment in the manufacturing industry dropped a further 21.9 percentage points, with a considerable net 28.6 per cent of employers reporting an intention to reduce permanent staff over the coming three months.

The decrease in international tourists is impacting the tourism industry –traditionally a high income earner right across the region. Tourism operators have reported a 68.2 percentage points decline in sentiment, with a net 50.0 per cent of tourism employers intending to reduce their permanent staff levels over the coming quarter.

The IT industry is one of the few industries maintaining positive sentiment, with a net 19.5 per cent of employers reporting an intention to increase their permanent staff levels over the coming three months. Down just 3.2 percentage points following a sharp drop in the previous survey, sentiment is very strong in comparison to other industries in the region and the national industry average.

Employer sentiment in the accounting and financial services sector remains relatively strong, with a net 22.2 per cent of employers planning to increase permanent staff over the coming three months.

By size
Employer sentiment within large companies has moved into the negative with intense pressure on profits forcing many large companies to streamline staff numbers to cut costs. A net 13.2 per cent of employers are reporting an intention to reduce permanent staff levels, this is 23.1 percentage points lower than the previous Hudson survey.

Employer sentiment within medium sized businesses continues to fall sharply and has now moved into the negative. Down 15.2 percentage points, a net 11.5 per cent of employers reported an intention to reduce permanent staff over the coming three months.

Despite being down 11.7 percentage points from the previous Hudson survey, the small business sector remains positive, with a net 6.7 per cent of employers reporting an intention to increase permanent staff over the April to June 2009 quarter.

Contracting/temporary overview
62.5 per cent of employers intend to hold their contracting/temporary workforce steady, 11.7 per cent intend to increase their contracting/temporary workforce, and 25.8 per cent intend to decrease their contracting/temporary workforce. The net result is 7.0 percentage points lower than reported in our last survey.

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About the Hudson Report
The Hudson Report is uncovers and analyses the hiring expectations of New Zealand employers.

Hudson recruitment professionals personally surveyed 1,673 participants to collect the data for the hiring expectations survey, which covers the intentions of New Zealand employers. The Hudson Report combines the expectations of key employment decision-makers from all major industries across the spectrum of organisation sizes.
Core findings are built on the premise that the expectation to increase or decrease net staffing levels represents a significant indicator of employers’ optimism for the growth of their organisations – and, as such, are strong indicators of more general economic trends.

About Hudson
Hudson delivers specialised professional staffing, outsourcing, and talent management solutions worldwide. From single placements to total solutions, the firm helps clients achieve greater organisational performance by assessing, recruiting, developing and engaging the best and brightest people for their businesses.

Hudson is a division of Hudson Highland Group, Inc. one of the world’s leading professional staffing, retained executive search and talent management solution providers. The company employs more than 3,800 professionals serving clients and candidates in more than 20 countries. More information is available at www.hudson.com.

ENDS

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