Employment expectations continue to improve

Employment expectations continue to improve for second quarter of 2010

Auckland – Wednesday 31 March 2010 – New Zealand employers’ sentiment has improved to mark the fourth consecutive quarter of rising confidence, according to the latest Hudson Report: Employment Expectations survey released today. The latest results show that New Zealand employer sentiment has increased by 0.2 percentage points (pp), meaning a net effect1 of 19.8 per cent of employers report plans to increase their permanent staff levels during the April – June 2010 period. Employer sentiment has now improved by more than 31 pp since the historic lows recorded in March 2009.

1 Net effect is calculated by taking the percentage of employers surveyed who expect to increase staff levels during the next three months and subtracting the percentage of employers surveyed who expect to decrease staff levels

There is a continuing strong shift in intentions away from reducing headcount, with the proportion of employers looking to reduce their permanent staff levels decreasing from 8.2% last quarter to 7.8% this quarter. The proportion of employers intending to hold their current staff levels steady rose from 64.1% to 64.7%, while the proportion looking to increase their permanent staff levels edged down slightly, from 27.7% to 27.6%.

The results from Hudson’s latest survey suggest that on balance employers remain cautiously optimistic for real signs of growth in the latter half of the year, said Marc Burrage, Executive General Manager, Hudson New Zealand. “Employers are holding their line this quarter, which is a pleasing sign of stability for the slowly emerging economic recovery. Business confidence has remained upbeat throughout the first few months of 2010 and the recent results for GDP in the December quarter of 2009 show the economy is growing, albeit at a slower pace than previous recoveries.”

All industries surveyed for the April quarter have reported positive sentiment for the third consecutive quarter. Whilst employers in certain sectors such as professional services, IT and FMCG have moderated their assessment of the market with small declines from last quarter, the majority have reported further increases and are now at their most optimistic for 12 months. The South Island remains the most confident of the regions with a net 26.1% of employers indicating an intention to increase permanent staff levels, while the Upper North Island has fallen back slightly.

“The varying levels of confidence among employers in different regions and sectors reported last quarter remain. It’s particularly encouraging to see the strong improvement in confidence among employers in manufacturing and the construction, property and engineering sectors. These industries were knocked really hard last year and for the last two quarters they’ve recovered significantly to confidence levels not seen since mid-2007.

“There’s no doubt that challenges lie ahead for the New Zealand economy to translate some of the business confidence into real growth and now, more than ever, businesses need to ensure they have the right blend of skills and experience in place to meet these challenges. There is little room for complacency and employers must remain vigilant about their recruitment and retention processes so they can maintain and improve the talent within their business, building teams that will deliver successful results in the months ahead,” said Burrage. www.nz.hudson.com Level 6, Gen-I Tower t 64 9 977 9800 66 Wyndham Street f 64 9 909 8991 Auckland 1010

Economic and labour market conditions

The New Zealand unemployment rate rose to 7.3% in the December 2009 quarter and there are almost 168,000 people unemployed nationally. The rate rose more steeply than anticipated in December but Treasury now forecasts that unemployment has probably reached its peak earlier than anticipated.

The Reserve Bank has been signalling consistently for some time that interest rates will remain on hold until the middle of this year, at the very least, since inflation is not an immediate concern while consumer demand remains fairly sluggish.

The buoyant growth in Australia is encouraging for exporters who are now able to take advantage of the best exchange rate with the Australian dollar in ten years. But the pockets of uncertainty affecting consumer confidence persist while there are concerns about the proposals put forward for the May Budget around property investment, tax cuts and raising GST. These concerns are reflected in subdued retail spending and a stalling housing market.

Key findings

By industry. Employers in the telecommunications industry are now reporting the highest levels of optimism overall, up 4.8 pp since last quarter, a net 39% are indicating an intention to hire permanent staff in the next three months. The strength of confidence in the industry may be due to the Central Government’s commitment to broadband, recently reaffirmed in the National Infrastructure Plan.

The largest rise in confidence was reported among employers in the construction/ property and engineering sectors, surging forward 17.1 pp this quarter to show a net 32.4% indicating an intention to hire permanent staff over the coming three months.

The Professional Services and IT sectors continue to report strong sentiment above the national average, while employers in both sectors have moderated their score since last quarter. Professional services employers report a net 27.9% indicating an intention to hire permanent staff in the second quarter of 2010, down 3.22 pp. After three quarters of rising demand, employers in the IT sector have scaled back their expectations with a fall of 13.9 pp this quarter, after a surge of activity to engage new resources in the New Year period. Still, a net 26.6% of IT employers report an intention to hire permanent staff in the next three months

Sentiment in the financial services/insurance industry continues to improve gradually, building on increases of the past three quarters, a net 22.5% of employers are intending to increase permanent staff levels during the next three months. www.nz.hudson.com Level 6, Gen-I Tower t 64 9 977 9800 66 Wyndham Street f 64 9 909 8991 Auckland 1010

In the government sector employers remain very cautious about hiring permanent staff due to strict headcount caps within Central Government departments. Down 2.2pp from last quarter a net 10.6% of employers report an intention to increase permanent staff levels during the next three months.

Sentiment in the manufacturing industry continues to rebound strongly from the extreme lows of 2009, with a net 26.7% of employers reporting an intention to hire permanent staff in the next three months, up a considerable 8.7pp this is the strongest result since mid-2007.

Sentiment in the FMCG sector, has eased 4.6pp following a large jump in confidence last quarter, with a net 9.1% of employers currently planning to increase their permanent staff levels over the coming three months.

By region. Across the country, the South Island continues to report the highest level of confidence, up 0.5pp from last quarter with a net 26.1% of employers indicating an intention to increase their permanent staff levels over the coming three months. Employers in the Lower North Island reported the biggest increase in sentiment since last quarter, rising 1.5pp to 19.3% a welcome return of confidence after having dropped back slightly last quarter. The Upper North Island is the only region to record a decline in confidence from last quarter, with sentiment easing 1.1pp after three consecutive quarterly increases previously. Sentiment is nevertheless well above the deep negative recorded 12 months ago, with a net 17.8% of the region’s employers planning to increase their permanent staff levels in the next three months.

By size2. After small, medium and large sized businesses all reported increases in sentiment over the past three quarters, it now appears that large companies are driving the improvement in employer sentiment nationally while small and medium sized business have both recorded a decline from last quarter’s 18 month highs.

Large companies have continued their steady run of improving sentiment with a further quarterly increase of 3.9pp.. A net 20.1% of employers reported an intention to increase their permanent staff levels over the coming three months.

Small businesses have reported a 9.4pp decline in sentiment following the large jump in confidence reported last quarter, possibly due to a moderation in sentiment after the holiday season optimism. The small business sector nevertheless remains far the most confident across the sectors, with a net 30.6% reporting an intention to increase their permanent staff levels over the coming three months.

Contracting/temporary overview

Contracting/temporary employment expectations have remained in positive for the third consecutive quarter, with a net 6.2% of employers reporting an intention to increase the size of their contracting/temporary workforce over the coming three months. This result is up 1.4pp from last quarter.

ENDS

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