New Zealand’s unemployment rate rose from 3.9% to 4% in the last three months of 2023, according to data released by Statistics New Zealand on Wednesday morning.
It appears the labour market has held stronger than expected by economists, many of whom were expecting an unemployment rate closer to 4.3%.
Becky Collett, a senior manager at Stats NZ, said unemployment had returned to pre-pandemic levels after spending two years at historic lows.
Unemployment dropped to 3.2% in December 2021 and only climbed 0.2% percentage points in the following year. High net migration and interest rates begun to push it higher at the start of 2023.
“Low unemployment formed part of the unique economic period from 2021 to 2022, as restricted borders limited increases to labour supply and labour demand remained high,” she said.
The underutilisation rate, a broader measure of spare labour capacity, also rose from 10.4% to 10.7% during the December quarter. This rate was 9.3% in the same quarter of 2022.
People who had less work than they were available for were the biggest driver of the underutilisation rate, with an extra 8,000 workers reporting wanting to work more hours.
An increase in net migration boosted the working age population by 3% during the year, meaning the country added 124,000 potential workers bringing the total to 4.3 million.
The working age population includes most NZ residents over 15 years old who aren't 'institutionalised'.
Stats NZ said this was the largest annual growth in the Household Labour Force Survey, which goes back to 1986.
The total employment rate was 69%. It rose 2.4% throughout the year and 0.4% during the quarter, but remains below its peak of 69.8% in June 2023.
“The employment rate decreased over the past six months as the working-age population grew faster than employment, meaning the proportion of people who were employed declined,” Collett said.
There were roughly 70,000 available jobseekers in December within a potential labour force of 92,000. Another 22,000 were unavailable jobseekers.
Lifting wages
Despite the weakening labour market, wages have continued to grow. The labour cost index increased 4.3% during the year, this measures the cost of the same standard job to employers.
Average hourly earnings rose 6.9% to reach $40.84, and average weekly earnings increased 6.1% to $1,588. These measures potentially include promotions and improvements in the quality of work.
Public sector wages rose faster than in the private sector. Annual private sector wages were up 6.6% in 2023, while in the public sector they were up 7.4% -- the largest annual increase since 2006.
Sue Chapman, a business employment indicators manager at Stats NZ, said the labour cost index for the public sector rose 5.7% annually, the highest rate since the series began.
“Recent growth in public sector earnings follows a period of pay restraint between April 2020 and March 2023 as a response to the impact of COVID 19,” she said.
Non-response rate
Statistics NZ’s quarterly employment survey only received a 78.6% response rate, the lowest since the survey was redesigned in 2021, and down from 87.3% in June 2023.
The Government agency said it did additional quality checks on the data to assess whether it was still accurate. It found national values were accurate, but there were biases in some particular industries.
63 Comments
Commercial real estate crisis? Even without that, I cannot see public sector wages continuing to increase like that under this govt. This data is all in the rear view mirror now. I suspect what is happening today is a different story, but we wont find out for another few months
Exactly.
Only reason i can see to cut the OCR is to help those that are struggling with current settings.
However if RBNZ helps the peeps that are struggling then they will spend more, house prices will rise, people will feel richer, fomo will return inflation will return and we will have an even worse bubble....
Best case .. is that the ocr stays put for a year+ possibly indefinitely. Sure the economy might contract a bit. And some jobs will go (particularly those relying on rapid house price rises) . but most people are and will be fine and we will all work out how to prosper without needing house prices to rise unsustainably .. nor need rates to be super low.
See my other posts. Especially the ones that include references to Oil Tankers, low productivity, understanding inflation.
Were I the entire RBNZ MPC (monetary policy committee), I would most likely have cut 0.25% last November with the message being, "On hold. Could go up or down as new data comes in. Or stay at this level for a longer period."
I'd cut anther 0.25% at next MPS with the message. "We're not happy at all with this data but on balance we see few risks of inflation taking off again or becoming entrenched. We do see a risk of inflation coming down more slowly than we'd like and should that remain the situation, we'll have no reservations about reinstating a higher OCR - possibly back to 5.5%"
After that I'd be looking at the data. But I feel the easing bias would be assured. (Not that I'd ever say that publicly.) Should unemployment rise more quickly, or GDP contract more quickly, I'd be unafraid of larger cuts. And if larger cuts were required, DTI ratios would be dropped significantly. I am not a banker's friend. But I am NZ Inc's.
Or the absence thereof.
But if the RBNZ doesn't get it's act together and start understanding the data then rising unemployment will indeed become the story of late 2024 and all of 2025. (The NACTF won't like that at all. Especially that other image conscious Chris dude.)
No employer with a soul wants to make a staff member redundant just before Christmas. I’m sure a lot of employers just held on towards the end of 2023 with the hope of an uptick in 2024. Eventually reality will hit home and there will be redundancies left, right and centre. I expect a massive uptick in unemployment for the next quarter. Particularly construction and retail.
Most "true" capitalists are heartless bastards. Most small business employers aren't "capitalists".
It's not DGM to observe how people are treated and viewed by institutions, corporations, the market, labels and titles, and our societal values of capitalism and economics.
To be exact 20th Jul 22, 1:33pm.
https://www.interest.co.nz/public-policy/116828/quality-analysis-unlike…
You're in good company, HM.
Like Warren Buffet says, he knows what will happen, (and the general sequence), just not when.
Memories plays tricks when disasters are created, and we live through them. Everything seems more compressed and the fact that an economy is like an oil tanker gets overlooked.
E.g. our current bout of inflation actually started way back in October 2019 when a Chinese doctor desperately posted on Chinese social media about some strange new respiratory inflection that was killing patients and no known treatment seemed to work. (He later died from it too.)
I studied 'black swan' events in an economics history paper and knew what could be coming when I first read the posts in November 2019. Part of this study included plotting events and statements on timelines. We all remember the Great Depression started with the 1929 stock market crash. But it didn't. It was a culmination of events (and previous mini-crashes, some were not mini either) that started way earlier.
Like you, I fully expect the RBNZ to hold interest rates too high for way beyond when they should have started easing. (In the same way they held rates far lower, and for far longer, than they should have back in 2020.)
But this in no way will detract me from pointing out how inept I believe they are.
Nor will it stop me from pointing out the economic ineptitude of the general public when they believe all that has happened, and will happen, was and is, inevitable or even the right thing to do.
Have you made up your mind as to which of your stories about ‘your boys’ is true in terms of their investments? You got found out there
I think someone who is wrong every now and then - but is also right a lot of the time - has more credibility than someone who lies.
btw you had a go at my bearishness on Australasian shares beginning of 2023. Turns out I was pretty much right
The timing is more important than the prediction. For example I can predict “there is going to be a recession “ with almost 100% chance of being right at some stage.
Anyway I’m not having a go at you, I change my predictions on a daily basis, not long ago I thought OCR cut this quarter, now I think next year!
Someone makes a guess based on the information at the time and then years later get's it wrong. We are spitballing predictions on a website based on our own analysis, not Adrian Orr who is paid a sizeable sum to do so. Cheer up mate, we're here to learn and grow our minds, not fling dung like monkeys.
More here: https://www.stats.govt.nz/news/unemployment-rate-at-4-0-percent/
And https://www.stats.govt.nz/news/average-hourly-earnings-up-6-9-percent-a…
And some raw data here: https://www.stats.govt.nz/information-releases/labour-market-statistics… (This actually the best stuff if you're nerdly and fluent with spreadsheets. Enjoy.)
I think there might be a few things going on:
- casualisation of labour: more people working multiple casual contracts, if one ceases they have others to fall back on, they might only have 30 hours of work but it’s still better than the dole
- businesses holding out as long as possible in terms of letting go of staff, but how long can they sustain that
- related, starting to hear of 9 day working fortnights becoming more common
- people on work visas losing jobs, doesn’t show up in the unemployment data
- the brown stuff really not hitting the fan until this year
"Unemployment rates have returned to 2019 levels, following recent historic lows," work and wellbeing statistics senior manager Becky Collett said.
Source: https://www.stats.govt.nz/news/unemployment-rate-at-4-0-percent/
Interesting choice of words from a work and wellbeing statistical manager. So ...
1. Inflation at pre-pandemic levels
2. Unemployment at pre-pandemic levels.
3. ... I could go on with other measures
But the RBNZ continues to hold interest rates (and household & businesses costs) high?
Anyone else see the problem?
Does the RBNZ want to embed inflation into the economy? Whether they want to or not - that's becoming an almost a certain outcome.
I'm exasperated with the out of date thinking and jawboning from the RBNZ. I want to ensure counterviews to the RBNZ rhetoric and bank economist nonsense is surfaced. My primary concern is for NZ Inc. Nothing more.
(But since you ask, share portfolio has put on some serious gains in the last 12 months. No mortgage relief required as all mortgaged properties are well beyond cashflow positive. But my hobby - property development - would benefit from rate cuts. I hate money in the bank doing nothing.)
I don’t think that is fair.
Rather, I think Chris understands the (lagging) consequences of the current approach. Which if he and I are correct (and perhaps we won’t be) is a really nasty outcome in terms of the economy and employment.
I think he also makes the good point that the decision making should be informed by the trends rather than ‘this point in time’ (actually already out of date) data
But you are forgetting that the RBNZ are not responsible for the economy and employment. In fact I thought you were one of the many that didn’t want them to be responsible for employment Unless the RBNZ see a bigger risk of going under their target than going over they shouldn’t cut, their job is simple by design.
"...not responsible for the economy..."?
Our purpose
Toitū te Ōhanga, Toitū te Oranga
We enable economic wellbeing and prosperity for all New Zealanders.
https://www.rbnz.govt.nz/about-us/our-purpose-vision-and-values
Does the RBNZ want to embed inflation into the economy? Whether they want to or not - that's becoming an almost a certain outcome.
I'm a little lost on this point, could you give rationale? Due to the strong labour market perhaps? RBNZ use monetary policy to try and stifle inflation back to their target point which they will do at all costs to the economy, how then will inflation be embedded?
Almost all business require working capital. Many borrow large chunks of it and this increases as an economy contracts. The interest they pay becomes a cost. These costs get passed on. Ergo inflation.
Employees, struggling with the cost of living, not as reported by the RBNZ's CPI but the real cost as reported by Stat NZ's Household Survey which both trails and falls more slowly than the RBNZ's CPI as it includes long tail costs, e.g. interest payments, that the CPI does not. The employees maintain pressure on employers for wage and salary increases. Many employers will provide these increases. Most self employed people, (lawyers, doctors in private practice, engineers, architects, plumbers, electricians, sole charge retailers, small builders, etc.) do too. The costs are passed on. Ergo inflation.
But the worst effect - by far - is that businesses hold off in investing in new capacity, i.e. new / upgraded plant and machinery. It become far easier - especially when unemployment is rising or high - to simply add another body to the payroll. In low productivity economies like ours, this reduction in investment in new capacity simply ensures we remain a low productivity nation. But it also means we don't have capacity when demand increases. Ergo Inflation.
But it gets worse on the investment in new plant and machinery front if rates stay higher for longer. Basically, the added interest cost means the bar lifts higher so new investment becomes even slower because the break-even / ROI calculations can't let the investment take place with such high costs.
After period - maybe 5 years - things settle into a 'new normal' with a cycle of constantly higher inflation and constantly high interest rates inside a constantly low productivity economy. The mighty US economy has high productivity and many point to their low interest rate environment as the primary reason.
Thus if the RBNZ holds the OCR at the current rate for much longer our 'new normal' will become ingrained, systemic even. The best time to have stopped this process was November last year with a 0.25% cut with a "we'll wait and see what happens" message. They didn't. About their last opportunity will be the next MPS. After that 'new normal' thinking will become the normal and rates will be cut very, very slowly ... and NZ Inc. will languish once again.
Interesting analysis thank you. We are in the highly inflationary predicament in my mind thanks to the insane levels of debt piled into by the private and public sector from 2020 - 2021 (COVID stimulus, LVR restrictions removed, LSAP flooding money into circulation, household debt via mortgages). When checking the graphs available on this site, the correlation between the increase in household debt March 2020 - July 2021 overlaps closely to the increase in YOY inflation.
While I appreciate the decrease in future capital investment in machinery etc, overall the picture is clear that we rely on unproductive asset price increases to artificially prop up our countries stats and keep people spending through the wealth effect. I'd agree the increase in wages will stifle business growth to some regard, and monetary policy is outdated and blunt for it;s intended purpose in modern NZ, we seem doomed to face todays problems with yesterdays solutions. That aside, without change on how we tackle inflation, better stats reporting and taking actions based on trends while understanding the ripple effects and unintended ones from said actions, we will continue to batter the working folk while enrichening the asset rich few for the sake of the many.
The best solution I see is mass education of the public to understand the economic levers we have at play currently and voting according to the best interest of NZ Inc instead of themselves, however going by the last election, it is blatantly clear that the overall level of education on these subjects and willingness to forego one's own interests for the benefit of all is lacking and unlikely to change until something forces this sentiment through the wider population.
Simple... QE/fungible fiat created out of nothing earning interest after out of control wasteful government spending with nothing to show for it... and NZer's taxes/more debt are paying for the interest expense instead of going into building infrastructure and healthcare... higher the interest, more tax/imaginary debt gets printed/created to meet the obligation.... interest rate control isn't the right lever to pull to artificially set the cost money high if the country has sh*t out trillions out of nothing... just more of the government stealing from the future generation to payout the current debt holders/depositors which includes the fiat that was created out of thin air...
Look at the trend in the LCI.
Private sector has been falling for 4+ quarters.
Public sector was flat'ish through covid, then there was a catchup. Will public sector pay rates continue to increase at this rate?
Not a damn chance.
The NACTF will not only drop headcount they'll also freeze payrates saying public servants got their rises from Labour and no more are required for a long, long time. I.e. it will drop, and drop substantially from this result.
With the LCI falling, I'd say yes - this level is indeed below a level where there is such a shortage that employers will need to pay more for what they previously paid to increase output to meet demand. Or put another way, full employment (if you believe such things) occurred a few quarters back.
The DGMs have been both very right and very wrong. They are right that rates will be HFL, but the reason they are HFL is because the economy is so damn resilient! Who would have predicted an extremely low unemployment rate this long after after those OCR increases...
I'm not totally surprised.
As I and many others have said before, and the stats show, many people built up cash buffers (and make-do mindsets) throughout covid. Those buffers can't last forever. Many will be long gone. The inevitable will happen. It's just delayed. Perhaps yet another reason for the RBNZ to pull back gently as the make-do mindsets will be ingrained after almost 4 years of making do with just a brief respite when lock-down ended.
The underutilisation rate is key. Dec quarter is when you would expect a lot of sectors using part timers to busy. Anecdotally the student job market was not as buoyant.
"People who had less work than they were available for were the biggest driver of the underutilisation rate, with an extra 8,000 workers reporting wanting to work more hours."
How many of our recent immigrants would be selected for the Household Labor Force Survey?
Employers of part timers will be more confident to trim hours on their rosters as the employees have less options to change jobs. Minimum wage going up 0.45c an hour. No problem we will just chop an hour off your weekly roster.
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