New Zealand’s unemployment rate rose to 4.3% from 4% in the first three months of 2024, according to Statistics New Zealand.
This means the labour market is weakening at a faster rate than expected by the Reserve Bank (RBNZ) and some bank economists.
The RBNZ had forecast the unemployment rate to reach 4.2% in the March quarter as had Westpac, ANZ and Kiwibank economists.
ASB and BNZ economists had forecast correctly that it would climb a touch higher to 4.3%.
The RBNZ had previously said in its February Monetary Statement that labour market pressures were easing, “but by less than expected”.
Unemployment has ticked up since its record lows of 3.2% in the December 2021 and March 2022 quarters due to restricted borders limiting increases to labour supply while labour demand was still running high.
The underutilisation rate for the March 2024 quarter – which includes people who want more work hours despite having a job – went up from 10.4% to 11.2% in the quarter, and from 9.1% in the March year.
31,000 more people unemployed
Stats NZ said on Wednesday over the year unemployment rose by 31,000 to 134,000, while total underutilisation rose 75,000 to 355,000.
In the same period, youth unemployment or those between the ages of 15 and 24, reached 21,000, while youth underutilisation was up by 44,100.
The seasonally adjusted number of unemployed people rose 10,000 to 134,000 over the March quarter.
The total employment rate was 68.4% in March. That’s down from 69% in the December quarter and down from 69.7% in March 2023.
The employment rate last peaked at 69.8% in June 2023.
The working age population increased by 129,000 to 4.3 million while the number of people employed rose 36,000 to 2.9 million over the March year.
While the annual rate of youth employment fell by 24,900 to 381,800, employment numbers for people between the ages of 30 and 44 rose by a non-seasonally adjusted 50,800.
“While the employment rate has declined from recent highs over the past year-and-half, it still remains high within the full Household Labour Force Survey (HLFS),” said Stats NZ labour market manager Deb Brunning.
Wage growth slowing
Although wages and earnings have continued to grow despite the weakening labour market, Stats NZ said annual wage growth is starting to slow down.
“Wage cost inflation continued to grow over the year, but annual growth was slower than it has been in recent quarters,” Brunning said.
The labour cost index, which measures how much a typical job costs for employers, increased 4.1% in the year to March, compared to 4.3% in the December quarter.
Average hourly earnings rose 5.2% to reach $40.96 – an annual increase of $2.03, and average weekly earnings increased 5.8% to $1,593.
Average hourly wages rose higher for women, up 6.9% to $38.87 compared to the average hourly earnings for men which rose 3.8% to $42.79.
“While women have received greater increases to average hourly pay over the last year, as measured by the Quarterly Employment Survey, men’s average earnings remained nearly $4 per hour higher than women’s in the March 2024 quarter,” Stats NZ business employment insights manager Sue Chapman said.
Like the December quarter, public sector wages rose faster than in the private sector.
Annual private sector wages were up 3.8% in March, while in the public sector they were up 5.6%.
That wage growth for private and public sectors is still much lower than in the December quarter though where private sector wages were up 6.6% and up 7.4% in the public sector.
Stats NZ released their household living-costs price indexes (HLPIs) for the March quarter on Monday, revealing that the average cost of living for New Zealand households increased by 6.2% in the year to March 2024, driven notably by a 28% surge in interest payments on debt.
81 Comments
No indeed, however they are the worlds largest consumer market and hold the worlds global reserve currency. Therefore if they aren't buying from everyone else, then things start to slow down, and our dollar against theirs will have other implications for imports paid in USD.
Except NZD is a weak commodity based currency, supported by our high interest rates. Most of what we buy from external markets is in USD. If we drop our interest rates, our currency will weaken compared to the USD and prices will go up, hence inflation, and OCR rises. So, I will leave the basic math to you, but America does matter, and there is nothing we can do about it.
I'm not sure what you mean by "out of step with the rest of the world", however, wasn't the 2008 global financial crisis caused solely by the US? Isn't the USD the worlds reserve currency? Aren't the US exporting inflation to the rest of the world putting considerable strain on most (if not all) countries outside of the US? Seems like the US are a pretty big deal to me in terms of their impact on the global economy?
Wouldn't a recessionary environment weaken the NZD, which will increase the value of imports specifically oil in NZD? This would be inflationary.
In the 1945 - 2012 era NZ would follow the America into recession. America in recession collapses the price of oil, which is is deflationary. So CPI would collapse in NZ and the OCR would head down stimulating the economy. So you are correct.
But the game has changed. It is 2024 and oil and other commodity prices are influenced by a myriad of factors not Just the American economy. So I could easily see a situation where recessionary factors lower the NZD putting pressure on imports but oil & other commodity prices don't fall in NZD, they would actually rise. So the OCR can't drop.....so there is no monetary stimulus. We have to weather the storm.
More than 1.5 times the pay, more like 2/3. And yes they will get hired back, they just don't announce it. Lots of ways to hire people back, they just appear as another body on the project's consultant team and the contract variation gets put through. AT recently disestablished a senior executive to make savings and he was back in within a week at more $$ less responsibility. Having head count targets is a really really shit way of trying to keep public service costs down.
It's also worth pointing out that unemployment had been slowly but steadily failing since the GFC.
See the graphs here: https://www.stats.govt.nz/news/unemployment-rate-at-4-3-percent/
I don't find this surprising at all. The nature of work has changed thanks to new technologies, and new attitudes, meaning some that struggled to work can now find part time jobs and WFH jobs that previously didn't exist.
The relevance of this change would show up in the a fall in the Natural Rate of Unemployment (NRU) (the unemployment rate that exists when the economy produces full-employment real output whereas a rate lower than the NRU could become inflationary, i.e. kick off a wage price spiral).
The NRU is a theoretical number and hard to pin down but you'll see its value quoted all over the place (as you appear to be alluding too as well?).
It used to be quoted as 3.5% many years ago (depending on who came up with the figure, and in which country, state, etc.).
I'd suggest the NRU is even lower now. If I'm right, then at 4.3% there is quite a bit of spare capacity in the labor market.
I suspect NZ's historically terrible training and re-training record means the mix of skills continues to result in shortages in some areas and excesses in others.
Interesting rise in people not in Labour force from 1,185,500 to 1,214,900. A 2.5% increase. This is the largest quarterly increase since 2022. No cause for alarm but certainly worth watching.
The most concerning thing is the NEET rate of 15-24 year olds hit a new high of 14.1%. Hasn't been around these numbers since 2012
"Stats NZ said on Wednesday over the year unemployment rose by 31,000 while total underutilisation rose 75,000. In the same period, youth unemployment or those between the ages of 15 and 24, reached 21,000, while youth underutilisation was up by 44,100."
It really is a barbaric strategy to deliberately increase unemployment to drive down inflation when there are other levers that could be used.
"I think most levers that would be pulled to drive down inflation would end up increasing unemployment, would they not?"
This is what the RBNZ (and lenders) want you to think as they continue to make the rich richer.
The reality is quite different.
There are many lever available to both the RBNZ (e.g. credit growth restrictions) and government (e.g. tax) that could be used instead. While it is true there may be some increase in unemployment with using these other levers, many would not have the multiple-whammy effect a high OCR has, i.e. reducing investment in further capacity (investment plant, machinery and training), balance of payments hits from interest being paid offshore, hits to the governments books through lower taxation receipts, etc. etc. (The list of why the OCR is a b.s. tool is long indeed!)
Thanks for your reply. I assume the OCR has become the accepted standard (aside from just vested interests) is because it is a cheap, quick and easy method that people are accepting of? I would assume tinkering with tax to counter inflation changes wouldn't be as quick and easy, same for credit growth restrictions?
Blunt OCR instruments on the other hand are known to eventually deliver intended consequences
That's the kind of BS Robertson and Ardern must be saying to themselves to sleep better at night while many Kiwis will be facing a cold, hard winter.
Many European countries applied one-off taxes on windfall gains earned by sectors such as O&G, utilities and banking in 2022-23. I can tell you that the sky did not fall as a result, nor has there been a massive outflow of productive capital out of those countries as the vested interests wanted us to believe. CPI is much lower in the Eurozone than here in NZ.
NZ however chose to shaft the working classes in favour of the rich and did not even bother clawing back the excess taxpayer subsidies that were paid out to profitable companies that did not need it during Covid!
Total b.s., KiwikidsNZ. Using tax and regulation to control inflation, rather than central bank interest rate manipulation, is used by all advanced economies in Europe and elsewhere. Stop peddling the rich's Kool-Aid.
c17n, if I get time I'll reply for your questions, and the answers will show just how badly we (the people) been conned by the rich that control government (and now central bank) policy. Maybe Jfoe and others have some time?
I don't think that creating mechanisms to ensure that supply shocks would not spike inflation would increase unemployment. Windfall taxes or other temporary taxes would also do the job. But that would involve the Govt actually taking some responsibility, rather than just offloading it all to the RBNZ.
exactly. look at the imported fuel and then food inflation washing through into our economy, pushing on wages, which push on rents etc. Dumbest strategy possible - focusing on the last variable to move.
I don't think the RBNZ is allowed to use anything else but the government can certainly do more. Cutting benefits to the low end to reduce spending (beneficiaries) and then giving stimulus to the high end (landlord tax cuts) doesn't seem like a fair trade-off. Borrowing to do it does also not seem very fiscally prudent. The govt, for all their claims of being the party of fiscal responsibility, don't seem to have the best plan to help reduce inflation. Seems like they're content with letting interest rates do the job.
Time for the RBNZ to realize they've done enough and withdraw one of the biggest drivers of our (supposedly) sticky inflation ...
... which is ...
... wait for it ...
An OCR that is far higher than it needs to be at this time.
(The time to start easing was actually November '23 btw.)
Simply because artificially increasing the cost of money way above where it should be causes untold damage to NZ Inc.
First rule of first aid? Ensure your own safety first.
While the RBNZ is artificially inflating the cost of money, the safety of NZ Inc is at risk. Make us safe - then address the symptoms.
NZ Inc is a society that relies on exporting goods as a decent chunk of our GDP and henceforth they continue with the OCR as a decreasing dollar which fuels more exports. Hard with the balance of payments however given the level of interest they are paying on debt at the same time. Rock and a hard place indeed.
I think underutilisation will be a bigger issue than unemployment. This is due to the ‘casualisation’ of the workforce, and the ability of people to potentially juggle 2-3 jobs or ‘gigs’ at once.
I think there will be plenty of people losing full time roles, but able to pick up say 30 hours pw of bits and bobs.
30 hours of work pw is still way better than the dole, on multiple fronts.
Construction and infrastructure workers are reportedly leaving for greener shores in droves!
https://www.1news.co.nz/2024/04/29/construction-workers-leaving-nz-in-d…
Why wouldn't you? Australia has a $120 Billion 10 year infrastructure programme that they are now rolling out. Along with the QLD 2032 Olympics build kicking off, and a Govt commitment to build 1.2 million houses
Agreed. RBNZ's foreign currency pot is nowhere near big enough to stand up to the fallout of a premature cut. In anticipation of rocky times, they've been trying their hardest to bulk up this line of defence.
It looks like the RBNZ has little choice here but to follow the FED while coming up with well prepared releases "overseas inflation remaining stubbornly elevated. Locally, it's all tracking pretty much as anticipated"
Until it doesn't.....
The government chooses the unemployment rate that it is comfortable with by the use of its spending decisions. The governments spending should be counter cyclical to the private sectors so as to smooth out the business cycle. This is where a job guarantee could be introduced to give work to anyone who seeks it.
By my calculations the average since 2010 is 4.92% so we're not statistically back to the average yet.
Calculated from the data here
We aren't used to having this level of unemployment due to the last few years having been a boom for employment and wage increases, however there are still zombie businesses to be flushed as per the usual cycle. Nothing can be good forever.
Interesting thought, however unemployment was 4.2% March 2023 quarter, pre-working from home trends starting en masse and with the usual pre-COVI revolving level of migration of temporary workers, and immigration, but prices were more reasonable and the average punter had more disposable income to play with then. What can we infer form this? Interested to see what we come up with.
Fortunately Australia is short 90,000 residential construction workers (short 230,000 total construction workers). The exodus to the Lucky Country will continue. This will reduce NZ's unemployment rate as the unemployed simply depart for greener fields. This wont make housing cheaper to build though, nor will it bring inflation down.
https://www.theguardian.com/business/2023/dec/12/massive-worker-shortfa…
Australia is now pricing an interest rate increase, and there is now a 20% chance of a rate increase from the US Fed being priced in to the base case by the financial markets. What will the RBNZ do then, considering NZ has much higher inflation than both Australia and the US?
The underutilisation rate increased by 75k to 355k over the past year. That represents a 26% increase.
If unemployment number of 134k is 3.4% then the labour pool is 3.12 million ?
335k as a percentage of that same pool means 11.3% underutilised?
Forget the hourly. What are the bottom 2 quartiles of PAYE paying employees taking home weekly?
Is it more or less than last month, last year?
More per hour but less rostered hours.
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