Labour market sentiment takes a sharp negative turn

Economy / news

The Westpac McDermott Miller Employment Confidence Index has turned negative for the first time in two-and-a-half years

27th Sep 23, 9:09am by David Hargreaves

Source: 123rf.com

Labour market sentiment in New Zealand has taken a sharp turn to the negative.

The Westpac McDermott Miller Employment Confidence Index (ECI) fell by 7.4 points to 98.3 in the September quarter. This is the first time since March 2021 that households have held a negative view about conditions in the labour market, and the lowest reading for the index since December 2020. (A reading under 100 indicates that pessimists outnumber optimists.)

"Workers are telling us that it is becoming harder to find jobs," Westpac senior economist Darren Gibbs said.

“The lower perception of job availability likely reflects both the recent decline in new vacancies and increased competition for those vacancies since the re-opening of the international border.”

Gibbs said this measure often provides a lead on the direction of the unemployment rate.

"The latest reading suggests that unemployment will rise further over the remainder of this year."

Confidence about households’ earnings growth fell slightly in the September quarter. This has remained at low levels since the Covid-19 shock, despite a lift in wage growth in the official statistics.

“We suspect that households remain mindful of the rising cost of living,” Gibbs said.

“Even those who have managed to secure a large pay rise may feel that they are still struggling to get ahead.”

According to June quarter figures from Stats NZ, the country's unemployment level rose to 3.6% from 3.4%. This is still very low but shows an increase after the figure had been stuck between 3.2% and 3.4% since the second half of 2021.

And the rise in unemployment in the June quarter came despite a 1% (much higher than forecast) rise in employment during the quarter. But of course, there's thousands of people been coming through the borders now to fill jobs - so it means that employment can be rising, at the same time unemployment is rising.

The Reserve Bank, which wants to see slack appearing in the labour force to take the pressure off the country's high inflation (annual rate of 6% as of the June quarter), is forecasting that unemployment will hit 4.4% by the end of this year.

Market research director of McDermott Miller Imogen Rendall said all age groups have experienced a drop in employment confidence since the June 2023 survey, with the largest drop recorded amongst those aged 30 to 49.

"Those aged 30 to 49 are now pessimistic at 94.1 ECI, a drop of 10.5 points from last quarter, and the lowest index score for this age group since September 2020. Employment confidence amongst young people aged 18 to 29 dropped 2.5 points to 101.8 ECI and amongst those aged 50 plus it dropped 7.8 points to 97.7 ECI," she said.

"Concerns across the age groups centre most strongly around job availability and future job opportunities, however the older age groups are also worried about their own personal job security over the coming year."

The survey was conducted over 1-13 September 2023, with a sample size of 1,551. An index number over 100 indicates that optimists outnumber pessimists. The margin of error of the survey is 2.5%.

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26 Comments

by Waikatohome | 27th Sep 23, 10:45am 1695764750

I don't understand economics anymore.

1) To drive down inflation we raise interest rates in order to force a recession and put people out of work.

2) National say unemployment is bad and the unemployed are lazy, therefore they should be punished and forced back into the work force.

3) We give visas to unqualified people so that we can have a low wage economy.

4) Immigration drives demand and therefore we raise interest rates again.

Do we want people employed or not? Do we want growth or not? As a mortgage holder and wage earner, I am confused - because none of this is very good for me. It seems to work well for bankers, employers and land lords.

by HouseMouse | 27th Sep 23, 10:36am 1695764202

You just nailed the debacle that is the modern NZ / western economy!

by fortunr | 27th Sep 23, 11:04am 1695765898

It is all about balance - sustainable growth driven by productivity increases in the productive economy, not by parasitic housing speculation; all ideally with a relatively low unemployment rate, but without an excessive skill shortage (which may act as a bottleneck to the growth of the economy and as a potential trigger to a wage/prices upward spiral).

The problem is not demand per se, but excessive demand not linked to corresponding productivity increases and not matched by the existing productive capacity, but artificially generated by an excessively loose monetary policy and corresponding asset bubbles.

It is not about growth per se, but real growth linked to improvements in efficiency and productivity.

By the way, we do not only give visas to unqualified people, but also to highly qualified people in areas such as information technology. The small company I had in this sector could not have expanded without these skills from overseas.

by CN - new | 27th Sep 23, 11:10am 1695766248

Be very skeptical about rhetoric from politicians and their political spin.

Their primary goal is to win a popularity contest (commonly referred to as an election).

How do they do that?

They will say things that resonate with their audience.

To make themselves look good compared to their opposition, they will engage in negative politics and bad mouth their opposition.

They will make election promises / offer benefits to their voters if they win. (e.g tax cuts, increased payments, etc)

They will frame economic data, that makes them look good (or their opposition look bad)

It's all part of how they play the game to win.

by Rampart | 27th Sep 23, 1:56pm 1695776168

So you’re saying.. Chippy isn’t in it, for me?

by CN - new | 27th Sep 23, 2:25pm 1695777904

It happens by all players in all genuine democracies.

https://www.facebook.com/RepresentUs/videos/698300590696818/

The rules of the game and how they're played by the players are different in some other countries such as North Korea.

by John from Bunnings | 27th Sep 23, 11:28am 1695767335

Monetary policy is never meant to be perfect, authorities are always in a balancing act. The harder the pendulum swings in one direction, the harder it swings back.

by kiwikidsnz | 27th Sep 23, 12:04pm 1695769486

NAIRU theory has pretty much been debunked a couple of decades ago. But that's when the RBNZ people were still at school/Uni learning all about it because education & educationalists are typically a decade behind...

by DIYman | 27th Sep 23, 1:04pm 1695773051

I think we are missing a significant economic factor, we live and trade in global markets

most NZ employment is or can be substituted with external labour, and government policies need to consider these substitutions

We are not short of work in NZ, we are short of businesses who believe in keeping jobs here

Examples are

Sending phone calls overseas to call centers with lower wage economies .

Importing manufactured goods from countries with lower wage economies

Importing food, like frozen fish, biscuits, almost anything you eat from lower wage economies.

Exporting unprocessed timber, fish, and probably something else to lower wage economies and bringing it back to NZ

by Averageman | 27th Sep 23, 1:51pm 1695775884

Every minimum wage increase, every extra holiday, every extra sick day, every health and safety requirement and every Te Reo requirement makes us increasingly more and more uncompetitive compared to many other countries in the pacific.Throw in continued protection of excessive bank profits and subsidised extortion of not property owners by the rentier class, NZ is a real mess. Its is easy to consider that the current Lab Govt has done more to destroy the future of low skill employment in this country that any in recent time. Add in reinforcing more money for the pajama wearing excuse and blame seeking members of our population while not being productive, we have the foundations of the mess that is NZ today.

by K.W. | 27th Sep 23, 2:09pm 1695776953

100%, especially the cultural stuff. When it was reported that NZ had been running an ad campaign for doctors overseas for 8 months and managed to recruit nobody, I went and had a look at the ad campaign. It was so Maorified it made it look like NZ was a poor African country recruiting for doctors without borders to work with disadvantaged indigenous tribes. No wonder nobody wants to come work in our health system! I compared the concurrent South Australian recruitment campaign that promoted its modern, high tech surgical focus, along with its beaches (tagline was "from heart surgery to the beach in a heartbeat) and its obvious why young doctors won't touch NZ with a barge pole. Does this Govt have any idea of how much damage is being done positioning NZ as an indigenous nation?

Another anecdote, an American friend of mine works here as a residential caregiver (ie looking after the worst of the juvenile offendors) for Oranga Tamaraki. She has basically been told that she won't be able to be promoted because she isnt Maori and doesnt speak Te Reo. So no surprise, she's considering returning to the US.

Then there is the $13,000 course cost for foreign nurses to spend 8 weeks learning about the Treaty of Waitangi and "cultural safety" while in Australia similar training consists of a few hours of online study that costs a couple of hundred dollars.

by No Moa | 27th Sep 23, 8:17pm 1695799072

Great comment, we have friends working in the medical profession that are afraid to say anything against Maori being prioritised over non Maori.

Labour are making it hard for everyone.

its over bearing, no sensible people from developed nations want to move here, its getting so backward.

by Rampart | 27th Sep 23, 1:57pm 1695776251

It ain’t all rosy for employers out there when the majority of your clientele are broke and your running costs seem to go up every week.

by Harry B | 27th Sep 23, 2:21pm 1695777718

I Agree

The government tell us we are letting in to New Zealand 100,000 people a year

Our hospitals can’t cope with the current population , we can’t get to see a GP for a couple of weeks, schools are full, police are under resourced

Going by world standards the Waikato region should have another hospital the same size as the existing hospital

All we have done over the years is to add a little building here and there to house the increasing number of hospital managers but have never had any long term plan to plan for an increasing population

None of the current parties have any idea how they are going fix this mess, sorry I do know ,we will just let more people in and grow the economy

We are becoming a third world country

by Rob Reid | 27th Sep 23, 9:08pm 1695802120

There is economics, and then there are central planners.

by ikimpaul | 27th Sep 23, 10:59am 1695765553

Oh Oh

1. there goes the green shoots in the housing market

2. there goes the tolerance for high levels of immigration

upside is interest rates might not go up any further.

by xingmowang | 27th Sep 23, 11:04am 1695765880

The US has not imploded yet. But soon it will and NZ would feel the really chill by then. I'd say before this Xmas.

by Hamish | 27th Sep 23, 11:24am 1695767041

Summer is coming.

An el nino one at that.

by JimboJones | 27th Sep 23, 12:36pm 1695771388

We need the US to implode. Then we can lower interest rates again.

by DIYman | 27th Sep 23, 1:05pm 1695773109

what do you define as imploding

by JimboJones | 27th Sep 23, 12:35pm 1695771317

No more rate rises needed.

by HouseMouse | 27th Sep 23, 1:37pm 1695775071

Why not?

Inflation is still very high, and unemployment very low. GDP is passable.

This report signals rising unemployment, but it does not equal high or even moderate unemployment levels.

According to their mandate, the RBNZ should be hiking further. At least until the data shows a significant and sustained rise in unemployment.

nb. This doesn’t suit my position at all, given my fixed term mortgage is up in July. But it’s what I think the RBNZ should do based on their mandate.

by Averageman | 27th Sep 23, 1:52pm 1695775959

Correct. They have held off doing their job while the election is front and center. Independence be damned.

by Waikatohome | 27th Sep 23, 1:55pm 1695776108

That assumes that this actually works as a method to cool inflation. People on low to middle incomes with mortgages have already stopped spending. Perhaps taxing those with capital (Mortgagee free property, land and assets) would be fairer and would better target those who still have money to spend.

If we need higher unemployment, why are National so keen to get the unemployed back to work, surely they are doing their bit to cool inflation by being on the benefit.

by HouseMouse | 27th Sep 23, 2:36pm 1695778570

Yeah, and I never said that I think it works. I agree with JFoe’s view that in many respects it is counterproductive.

However, if we go by their mandate - whether that is right or not - they should still be hiking.

by ChrisOfNoFame | 27th Sep 23, 2:42pm 1695778952

The RBNZ will be okay with this.

Employers will be thrilled. Why? They can get the worker to accept less. (And soon it will be even less. Just to have a job.)

Meanwhile - the bulk of us that are salary and wage earners can only look on fearfully - and over our shoulders - at who might do our jobs for less.

Stilling picking sweet lovin' noises from the RBNZ's MPC early next year once the Christmas accounts are in and show just how awful it is for the majority. (Retailers rely on Christmas and just after Boxing day many will know they're going to the wall.)