It might be the beginning of the end for raging hot labour market conditions with the release this week of the latest unemployment and wage figures.
But then again, everybody's been expecting for some time that the labour market will cool - and certainly the Reserve Bank's wanting that to happen - but the labour market has not been playing ball.
Our economy is still adding jobs, as Stats NZ's latest employment indicator for March shows.
The RBNZ is expecting that unemployment will rise very slightly to (a still very low) 3.5% for the March quarter from 3.4% (as of December) when Stats NZ releases the figures on Wednesday. But the central bank's then expected the pace of unemployment will pick up considerably as the year goes and, with it tipping the rate to be 4.8% by the end of this calendar year.
A symptom of the hot labour market and shortages of available staff has been rising wages, with private sector ordinary time hourly wages increasing 8.1% in the year to December. The RBNZ thinks the pace of the wage rises will slow to 7.6% as at the end of the March quarter.
Essentially, the RBNZ needs some slack to develop in the workforce to take heat out of the economy and assist its drive to get inflation back into the targeted 1% to 3% range.
While inflation as measured by the Consumers Price Index (CPI) did ease back to an annual rate of 6.7% in the March quarter from 7.2% as of the December quarter, a rate of 6.7% is still a long way from 1% to 3%.
The RBNZ for its part has been willingly brandishing its weapon of choice, the Official Cash Rate (OCR), having aggressively ramped it up from just 0.25% at the start of October 2021 to 5.25% as of last month, with general expectations in the market that there will be another 25 basis point rise this month, taking the OCR to a 'terminal' setting of 5.5%.
One thing that will be starting to help the RBNZ in terms of taking pressure off the labour market is the fact that inbound migration has accelerated very quickly from the standing start of closed borders during the pandemic. These are migrants that are now filling jobs that employers have struggled to fill.
According to the Ministry of Business Innovation and Employment (MBIE), 20,442 people arrived in NZ on work visas in March this year - which is higher than the numbers that were coming in before the borders were closed.
In terms of what the 'market' is expecting from the labour market figures this week, BNZ senior economist Craig Ebert says "market expectations" have gravitated to average expectation of a 0.5% increase in first quarter employment (1.8% year-on-year), the 'participation' rate edging up to 71.8%, from the December quarter's record high of 71.7%, and an unemployment rate of 3.5%.
The BNZ economists actually think the unemployment rate will stay at 3.4%, however, while they are picking first quarter employment growth of 0.4%.
Ebert notes reports from businesses are that it’s becoming less difficult to get and retain staff, "consistent with the burgeoning inward migration data of late".
"So, we are going to leave that at the 3.4% level we had on the board, so still steady from Q4’s 3.4% (based on a participation rate of 71.8%). We judge risks as skewed to an even higher number on Q1 employment but more two-sided with respect to the unemployment rate – could be higher but could just as easily be lower."
ANZ's economists reckon unemployment's going to fall again - to 3.3% - while employment may grow by 0.5% in the quarter.
Chief economist Sharon Zollner and economist Henry Russell say while signs of a slowing domestic demand "have undoubtedly emerged in recent months", they aren’t expecting to see these manifest as yet to any great degree in the labour market, which remains very tight.
And the ANZ economists expect average ordinary time hourly wages in the private sector will have increased at an annual rate of 8.3% as of the March quarter.
"Although we expect a solid labour market report in Q1, it may be something of a 'last hurrah'," the Zollner and Russell say.
"With the RBNZ getting traction, we expect one further 25 [basis point] increase to the OCR [Official Cash Rate] on May 24 before a pause to 'watch, worry and wait'. Labour market tightness is a key input to the inflation outlook but the RBNZ’s decision will also be contingent on the outlook for fiscal policy released at Budget 2023 on May 18."
26 Comments
A slowdown is yet to hit the lower wage job market, where our economy usually thrives.
Our economy has trended towards increased participation in low-wage exports or domestic markets, which creates low-wage jobs that locals don't want, for which we bring in more migrants, growing the domestic market and creating more low wage jobs.
We need good political leadership (missing!) to invest in policy reforms (missing!) and reduce the flow of low-wage workers (missing!) to break the cycle and kickstart the high-value export-driven economy.
"20,442 people arrived in NZ on work visas in March this year".
But given that New Zealanders are hitting 65, and can opt to retire on the national entitlement, at a rate of +26,000 per annum at the moment (and that rate is going to accelerate soon), then the employment stats might go in ANZ's direction after all.
https://www.stats.govt.nz/news/one-million-people-aged-65-by-2028/
Yip - true across the anglosphere....hence all nations are opening up the floodgates to as many immigrants as possible in order to increasing the size of the working pool that can generate tax to pay for the boomers retirement (and to hell with how badly this is going to impact our infrastructure and quality of life).
Treasury reports have been saying this is going to be necessary for a number of years now. And they are making it so.
Over the last few months I have purchased tools off builders heading back offshore, Korean and Chinese. Its now way easier to buy compactors, drop saws etc then it was before xmas. None of these will show in unemployment figures but they are jobs / workers that no longer exist. Also for true unemployed vs unemployable, its quite hard to get onto the benefit system while you have assets, could get real interesting.
My prediction this year from our annual thingy: https://www.interest.co.nz/personal-finance/118979/2022-was-weird-year-…
This years prediction:
The unemployment rate in New Zealand will not exceed 4.2% in 2023.
Even if there is a recession, which is nowhere near a foregone conclusion, our population age demographics will keep unemployment rates ultra-low.
Despite the best efforts of central government to flood the local market with low wage workers (bus drivers a "skills shortage", really? ) to suppress wages we are just in an era of insatiable consumer demand.
The RBNZ hatchet has been hard and heavy so it's still possible there will be a recession. The commentaries seem divided and I've found myself out on a limb by forecasting no recession this year.
Q1 data is still 6 weeks away and we will know Q2 before this October's election.
Bus drivers are very much a skills shortage with AT not being able to maintain existing services due to this shortage. Given we have no law and order and that a beating is potentially the reward for a night shift I can see why. We need new cannon fodder.
Flooding the employment market with generally young, enthusiastic (if unskilled in the main) young people is a good thing. The only alternative would be to ask our abletoworkbutdontwantto group to actually work, but I can already hear Chippy exclaim "not on my watch!!"
NZ is screwed if driving a bus is considered so highly skilled a school leaver cannot be trained etc, took me a weekend to get my heavy traffic license. Mind you look at our highly skilled leaders Willie Jackson, Marima Davidson... the super skilled Phil Twyford..... yep we are screwed. Mind you given current Truancy rates maybe there will be lots of truck drivers coming along soon.
It might take you a weekend to get an HT license but it's something different again to want to be a bus driver.
And it's compounded by the fact that no one wants to pay much for public transport. Super limited pool of willing candidates for the pay that job can afford.
Bring on the electric robot buses!
Quick google suggests that Auckland bus driver made around $26.62/hr in September last year ($55,369 p.a.), according to Auckland Transport, while the median salary in Auckland is $71-73k p.a. last year. The bus driver "shortage" is a manufactured excuse to bring in low wage workers to indercut local wages.
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