- The economic effects of COVID-19 and related border restrictions prompted a record jump in jobless rate to 5.3 per cent during the last quarter.
- The labour market seems to have tasted the bitter reality of the COVID-19 pandemic and associated business and border closures in the September quarter.
- The increase in jobless rate also reflects a restoration to more normal job hunting behaviours by Kiwis after inactive job-seeking during Alert Level 4 lockdown in the June quarter.
- The recent uptick in the jobless rate can turn out to be a perfect excuse for the RBNZ to slash interest rates further in its next monetary policy meeting.
- The eventual opening of two-way trans-Tasman travel bubble can deliver an immediate push to employment levels in Kiwi Land.
- The potential implications of the recent termination of government wage subsidy scheme on the labour market deserve a close watch over the coming months.
While Kiwi Land managed to escape unemployment disaster in the June 2020 quarter, labour market conditions deteriorated sharply in the September quarter. However, the current scenario still remains much less bleak than it could have been in the absence of wage subsidy support and effective containment of virus spread.
The economic effects of COVID-19 and related border restrictions prompted a record jump in jobless rate during the last quarter. After shrugging off COVID-induced risks in the June 2020 quarter with just 4 per cent jobless rate, NZ’s unemployment rate surged to 5.3 per cent in the September quarter.
Statistics NZ’s latest figures suggest that there were approximately 37,000 more unemployed people in the September quarter since the June quarter. This was the biggest rise in the number of unemployed people in a single quarter observed so far, with the next largest increase of 18,000 people seen during the GFC in the June 2009 quarter.
Given the scenario, let us discuss three C’s describing unemployment statistics in an optimal way:
The labour market seems to have tasted the bitter reality of the COVID-19 pandemic and associated business and border closures in the September 2020 quarter. To recall, NZ moved to the second phase of lockdown in Auckland and the rest of the nation during the quarter. This appears to have prompted companies to shed massive workforce amidst the country’s first recession in decades.
Women seem to have borne the excessive brunt of virus crisis than men, with their unemployment rate rising to 5.8 per cent relative to a 4.8 per cent increase in men’s jobless rate. It partially reflects the diversified impact of COVID-19 storm on different industries. For instance, more jobs are held by women in retail, accommodation and food services industry in Kiwi Land, which has stayed highly vulnerable to the Global Virus Crisis.
Moreover, the increase in jobless rate reflects a restoration to more normal job hunting behaviours by Kiwis after inactive job-seeking during Alert Level 4 lockdown in the June quarter. It is worth noting that NZ’s unexpected unemployment rate dip in the June quarter was driven by people’s inability to actively seek work during the virus-driven lockdown.
The recent uptick in the jobless rate can turn out to be a perfect excuse for the RBNZ (Reserve Bank of New Zealand) to slash interest rates further in its next monetary policy meeting on 11 November. The central bank is likely to follow the Reserve Bank of Australia that has lately reduced the interest rate to 0.1 per cent.
The central bank is further anticipated to take the cash rate into the negative territory as soon as February to boost employment and inflation in line with its mandate. Importantly, the RBNZ has kept negative interest rates and a number of other monetary policy tools open to inject capital into the battered economy.
One cannot neglect the importance of fiscal and monetary policy measures in keeping the labour market afloat over time. However, the eventual opening of two-way trans-Tasman travel bubble can deliver an immediate push to employment levels in Kiwi Land.
It is worth emphasising that majority of the pandemic-stricken jobs for women were in tourism-related space during the September quarter. Besides, the absence of visitors from Australia is claiming thousands of jobs to New Zealand at the moment. Given the situation, the execution of a fully-fledged trans-Tasman bubble can get many of these Kiwi women working again, stimulating economic activity significantly.
While one-way travel bubble is currently operating between Australia and New Zealand, a two-way travel corridor is expected to kick-off in Q1 2021. The move will enable Aussies to visit the Land of the Long White Cloud once again after a months-long grinding halt on travel imposed in March 2020.
Although unemployment levels are expected to stay at elevated levels for the next few months, the labour market appears to be faring better than expected in terms of job losses. The unemployment rate that remained at the lower end of most expectations in the September quarter testifies the same. However, the potential implications of the recent termination of government wage subsidy scheme deserve a close watch to gauge the labour market’s performance over the coming months.