Jobs portal Seek says the number of jobs advertised during April fell by 4% from February, while job ad numbers are down 30% year-on-year.
For the 12 months to April, every region across New Zealand reported a significant plummet in job advertisements.
The West Coast reported the biggest job ad decline, down 54% from April 2023. Wellington wasn’t far behind with job ads slumping 44% from a year earlier.
Other regions that suffered big job ads falls in April were in the Tasman, where they fell 41% in comparison to the corresponding period a year ago.
Auckland reported a 29% drop and Canterbury job ads were down 25%.
On a month-on-month basis, job ads fell 4% overall, with West Coast job ad numbers down the most, falling 36%.
Other regions hit hard were Marlborough job ads, which fell 23%, while job ads in Gisborne decreased by 21%.
Seek New Zealand manager Rob Clark said the public holidays bookending the month was likely a major contributor to the hiring slowdown and drop in job ad volumes during April.
“Consumer services roles saw the largest decline in April, with demand for hospitality and tourism workers down 21% from March,” he said.
“The downward trend is not across the board, however, with ad volumes in engineering, education & training and insurance & superannuation increasing month-on-month.”
In April, the insurance & superannuation sector saw a 17% increase in advertising volumes, compared to education & training experiencing a 2% rise.
'Incredibly difficult for candidates to stand out'
Seek also tracks applications per job ad, but there’s a one-month lag in the data they’ve recorded.
The jobs portal reported the number of applications per job ad increased by 5% in March, bringing it to 96% higher than March 2023 which Seek said already marked historically elevated levels.
“Applications per job ad jumped 5% in March, driving competition among candidates to even greater peaks. In industries such as manufacturing, transport & logistics, retail & consumer products and community services & development, applications per jobs have more than doubled over the past year, which can make it incredibly difficult for candidates to stand out,” Clark said.
Seek’s report showed the job application increases hadn’t been experienced in every industry as the hospitality & tourism and retail & consumer product job ad categories saw job application numbers slump 14% and 2% respectively.
Unemployment
At the beginning of May, the official unemployment rate climbed to 4.3% in the March quarter from 4%, which just exceeded the Reserve Bank’s expectations.
Unemployment has ticked up since its record lows of 3.2% in the December 2021 and March 2022 quarters. Statistics NZ said over the March year, unemployment rose by 31,000 to 134,000, while total underutilisation rose 75,000 to 355,000.
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.
75 Comments
They won't cut. Like I have said again and again, they were too late to the party with inflation (IT'S TEMPORARY DAMMIT!) and will go too far the other way too, holding rates higher for longer. Don't worry though, they get to check their own report card so apparently are doing amazing work.
I'm starting to think the Aussies got it right by not raising the OCR quite so much. While we could cut to the same level, the change in direction could bring on inflation and will certainly smash the NZD. We have an OCR that is too high but no ability to lower it.
Lowering the OCR now would do two things: (a) tell the rest of the world we are in the shit, and (b) tell the rest of the world that they will get a better return on investment in the US than here. No one will want NZD.
"We have an OCR that is too high but no ability to lower it. "
Not true at all.
I think I've mentioned that tax increases / decreases can actually work better than the OCR. Let me explain ...
Way before countries were conned by the rich into using central bank interest rates to 'control inflation', governments used taxes and all sorts of other regulation to restrict credit growth in the economy and the money supply overall. Guess what? It worked! But only when done at the right time. And that's the problem. Governments were too slow to act when the punch bowl had to be removed, especially if an election loomed. So the con was on. Give the role of acting in a timely manner to an 'independent' institution but ensure the tools they were provided were woefully inadequate (and didn't disadvantage the rich in any way), and restrict when they can act to looking at already published data. This was great for both rich people and politicians. The rich could plan with far greater certainty. And politicians could wash their hands of any responsibilities in controlling inflation.
Sound familiar? It should. For that's exactly what we have now.
"Lower the OCR and significantly raise tax and watch the NZD go to 0.10 USD?"
Would that be such a bad thing? (Exporters would love it! As would tourists!)
Remember we have a massive and ongoing balance of payments deficit.
We keep borrowing to plug the gap.
For how much longer can we do that?
The longer we try too - the more the NZD will fall to compensate.
I.e. the NZD is going down regardless.
Maybe we should live within our means?
(btw, the NZD is worth far more 10 US cents at this time. If we don't change our ways though, in 30 years? Who knows. We'll be repaying so much interest to overseas lenders that 10 US cents may be wishful thinking.)
So we'd use less. That's how it works right?
The price goes up so we either find substitutes (e.g. electricity, alcohol blends, etc.) or we use less (smaller vehicles, less imports, delay purchasing the latest and greatest when what we have meets our needs, etc.). Sounds like a win / win to me.
But I get it. You'd prefer the status quo.
Thats how it is supposed to work in theory....decades of persistent BoT deficits show that the theory dosnt match the reality.
And to make matters worse we have at the same time reduced our domestic ability to supply that which we need...and increased the body count that requires those imported necessities....go figure.
"Thats how it is supposed to work in theory....decades of persistent BoT deficits show that the theory dosnt match the reality."
The theory is sound and proved.
What you've overlooked is that decades of persistent BoT deficits have been funded by borrowing (both government and, more recently, private, I give you house price inflation). A slowly depreciating NZD which reflects the fact the NZD Inc is worth less now on a net asset / earnings potential basis because of this.
And, as we borrow more and more to fund our lifestyles, more and more borrowing has to occur, and all other things being equal, the rate at which the NZD depreciates speeds up.
Alas for us, there are numerous example worldwide over the last 400 years that show this will happen. We're like frogs. The water is slowly heating and we don't notice it. (Yes I know it's a disproven troupe. But it fits.)
"What you've overlooked is that decades of persistent BoT deficits have been funded by borrowing (both government and, more recently, private, I give you house price inflation)."
Not overlooked but rather held as an example that the 'theory' is flawed.
There was an (easier) alternative that was adopted....that alternative may not be sustainable but it has held (beyond belief imo) for 4 decades.
Okay. I get where you're coming from.
My example, and the theory I mentioned, occurs at the micro-economic level. I.e. it is part of how consumers make choices.
What's you're introducing is a macro-economic effect that means the consumers never have to make the choices and adjustments in response to a price rise, and the theory never really gets tested because 'borrowing' means people 'earn' more.
NZ has many 'systems' in place to protect consumers from having to make these choices. Examples? Superannuation and other benefits are index linked so they automatically adjust (and government has to increasing borrowing or taxes). Renters are protected from increases in house prices through the accommodation supplements (and government has to increasing borrowing or taxes while the property owners contribute to more borrowing by buying more properties at higher prices using their untaxed capital gains.) Workers demand higher wages, employers provide them by pushing up prices (and government collects more tax from workers as they move up the tax bands while businesses pay proportionately less because they have a flat rate of tax). GST is, oddly, another (prices rise and government collects more tax to redistribute).
I could go on and on. Many 'markets' in NZ are thoroughly distorted because of these systems which were built to help people. Alas, over the last few generations they've been funded by borrowing rather than increases in productivity or the inwards flow of overseas profits.
Just an aside, why did you say "4 decades"? The Lange government shake up? I usually use 3 decades which was when the RBNZ was formed and facilitated a massive increase in private borrowing.
I say 4 decades because that is when we removed capital controls and floated the exchange rate (the RBNZ was formed in 1934)
The problem I have with economic theory is it predicated on 'closed economies' (the same problem exists with MMT)...we do not operate in a closed economy AND importantly central banks have little control over the quantity of money (hence their reliance on a poor demand side tool of interest rates)
Because of these factors the incentives produce exactly what we have seen...productive activity moving to the lowest cost environments and consumption becoming the dominant factor in less competitive economies...until such time as the politics get in the way.
It works until it dosnt...in other words when the impacts on the voting public become too great to bear the desires of capital are overridden....with all that that implies.
Until that time politicians (and central banks) do their upmost to maintain conditions approved of by capital while placating the (voting) masses....those are the distortions to which you refer.
My disbelief at the 4 decades of negative BoT not impacting our currencies desireability stems from the fact it has been obvious for years that we are in exactly that trap with no apparent way out and we havnt (yet) seen the capital flight or currency depreciation....a few basis points above the Fed rate dosnt imo mitigate the risk, and yet here we still are...why?
I'll attempt to answer my own question...we have delayed the day of reckoning, first by increased asset valuations and when that reached saturation we then opened up the economy to increased demand (migration).....both have now pretty much reached their limits so whats going to be the next delaying tactic?
Yet to every job on Seek I post I always get over 100 applications... from people overseas without the skills, or indeed any ability to read the job ad being posted, (I have had air craft engineers and software techs apply for jobs in healthcare and vice versa with zero matching skills and obvious issues).
This is even with seek having a mandatory requirement that only those with citizenship, or residency would be able to be legally employed, apply in the role (as the roles are unable & unsuitable to support work visas). It seems Seek just ignores this and lets hundreds of people submit without any checks (and especially no checks for robot automated applications of which I get many of those too). Seek job posting data is equally bad with many being recruiters just looking for people to be on their books in tech fields as well. Seek data and data reports are meaningless with that garbage application & job posting management. Often it is that international interest is up, there are increases in automated and robot applications and recruiters who normally are holding off with the normal seasonal changes.
I normally have to use proforma replies to most the job applicants as Seek has still not learnt how to filter out those who are completely unable to be employed in the roles legally & stop spam bots. Even then it is a substantial task to go through all the useless overseas applications that have no chance in hell (because of the inability to support work visas for certain skilled roles in healthcare and tech).
Media still has not learnt that garbage information in means garbage out and Seek is made up of mostly garbage information in. They do not even track successful job matches.
If the government uses such data for any purpose be very afraid as they are bound to be f-ing it up.
So, pacifica, if you strip out the b.s. applications ... how many real applicants are:
a) a perfect fit for the job
b) a close fit for the job
c) not a close fit but if there was no one in a) or b) above you'd employ them - and train them
(As I say when renting my houses - you only need one tenant - even if you've got to show others around. And the others remain homeless, or in this case, jobless.)
My point here is that even though Seek's numbers are far from perfect, there appears to be plenty of evidence that labor supply has increased and can no longer be considered an inflationary factor for most sectors.
Note that if there is a skills shortage in one area - one has to question why anyone would think high interest rates will suddenly make that skills shortage less. (In fact, the reverse is likely to be true as potential applicants simply up sticks and head overseas.)
"I delete everything without a covering letter without even looking at them."
I do the opposite. Most covering letters are total b.s. and many are either 'form' or A.I. generated. They're a total waste of time in my opinion.
A C.V. becomes a legal document - unlike a covering letter - and liars can be dismissed immediately if they lie in their CV.
Stacks up with what I'm hearing anecdotally from my clients. Every time a job is posted they are flooded with applicants - and not necessarily qualified ones - it's often people who are clearly having to apply for anything at a similar paygrade regardless of their previous work.
Then to make matters worse even the basic, lower-paying, keep-the-lights-on jobs are harder to come by (supermarket shelf stacking, waiting tables in cafes, construction labouring) because we've shipped all our brainy people overseas and instead imported - to quote someone else here the other day - "desperados" willing to do more work for less money and while living in worse conditions.
This leaves selling your time on "rent-a-peasant" services like Uber and DoorDash, for which I imagine earnings will be under pressure as more people try to top up incomes or make a full-time living on these platforms.
"This is really part of what central banks are trying to do, kill off some zombie commerce and jobs."
Or are they trying to wipe out the newly formed competition? Drive down wages? Drive down productive asset values through 'going out of business' sales?... Golly! Who'd benefit from doing that?
They may wipe out some of the 10-20% of new businesses that might make it. It's objectively a worse time to be at the earlier stages of a business sure. Or at the helm of one that's got a business model reliant on cheap easy financing.
Unfortunately this smaller subset of new businesses is collateral damage, as are the lost jobs or stagnant wages.
Destruction is one of the only ways you can dampen inflation. The other is supply side, which central banks have little control over - although you can argue cheaper financing of new supply could also lower prices.
It's a wicked game for sure. Super happy not heading into this environment holding a lot of debt and high fixed overheads this time round. Arguably though, it's meant I have a lot more efficiencies in my operating and financing setups.
Anyone that makes it through the coming 3-4 years, is probably going to do well.
People with excess savings.
Businesses with good cashflow, low debt, and resilience to recessions.
People with a decent level of net assets.
You've got some rentals right? So potentially you.
Or it can be broken down into ethnicity, religion, age, marital status, a whole host of demographics.
Or is it whatever specific group you have in mind?
Money and intelligence can have a cascading effect. A poor person doesn't have the means to afford a good accountant and lawyer to advise on minimising tax for investments or self employment, where as a rich person does, and can harness this information to grow their wealth much faster if we were to say they were both as physically able as each other. Same argument for generational wealth, where by having the head star of already having money and 'more likely' to be raised in a home valuing education and financial prudence, the children of the wealthy are 'more likely' to succeed financially. Nobody will ever win an argument in this space as nobody can deny that there are rich and poor and likely always will be, but to say the rich get richer because they're smart isn't entirely concrete.
"A poor person doesn't have the means to afford ..."
You could just leave it there.
People with functional intelligence of all stripes can see opportunities but fewer can access the resources to take advantage of them. Funnily enough generally those that can do so already have resources and/or connections and it may well have nothing to do with their smarts.
A dead cert becomes a functionally risky bet if you can't put food on the table, whereas for those with the resources to bide their time it's still a dead cert. Nothing whatsoever to do with intelligence except if your wealthy enough to believe that.
This is hurting larger companies way more than it's hurting a solo bootstrapped founder. My competition is losing it's ability to out-spend me on ads, losing it's ability to out-hire me on talent, and losing it's ability to give me an offer too good to turn down. The downturns are wicked wildfires that burn and destroy, but following them is the perfect time for new growth to take hold.
Yes there are sick realities inside of it. That term "out-hire me on talent" is in reality loads of highly skilled people losing their jobs doing very little yet living comfortable lifestyles. These are people who are now desperately looking at lower paying roles (that I could afford to pay) which I might be able to put to better use economically speaking than their previous employer. It is cold hard systematic efficiency, this is what a 'healthy' economy looks like, more efficient allocation of land, labour, and capital (plus entrepreneurship which is spiking with a lot of skilled workers now out in the cold and forced to rely on themselves).
Is it a good thing for the little guy? No. Will the rich get richer? Yes.
The only way to do it better is to have a government actually try and re-balance the playing field and take from the rich to give to the poor. Until we get that political change Central Banks are just using the tools they have to try and maintain a healthy economy - their goals are not malicious.
SKF
We had a global adjustment of the price level through 2022 and 2023 driven by energy and food prices, which propagated through other prices. NZ's appalling management of this price shock will be taught to economics students in the future. Students will laugh in disbelief as lecturers talk them through the medieval monetarist framework and RBNZ's rigid adherence to nonsense...
- 'Look, they let the price shock spread throughout their economy and tried to tackle it like an excess demand problem omgl!!
- 'Oh what... for a few months there, young folk and people with disabilities found work... so they punished mortgagors for this aberration, collapsed consumer spending, and pushed 100,000 people on the dole! Why?'
- 'They tried to prevent wages going up and putting pressure on business prices, but higher credit costs just made price pressures worse and they got really sticky inflation. Why didn't they learn from the countries that glided out of trouble?'
I expect Jfoe will provide a list. But from my analysis it was countries with governments that were unafraid to intervene in the markets to force price stability using regulations (limits, quotas, price controls, etc.) and temporary fiscal means (including raising taxes, threatening windfall taxes and actually charging windfall taxes).
NZ's politicians were beholden to polls and wedded to neo-liberal non-intervention policy - so they did almost nothing and even when they did do something it was way too late.
Most developed countries saw spikes in unemployment in 2020, then price shock inflation in 2021/22, followed by inflation subsiding quickly and unemployment returning to at or below 2019 levels by early 2024. The average OECD CPI vs unemployment journey can be viewed here.
Some countries intervened using price controls and subsidies to prevent the imported price shock propagating through their price structure - Switzerland, Denmark, Spain, etc. Even the US did quite a bit and their 30-year fixed rate mortgages reduced wage pressures. These more interventionist countries saw inflation return to target range much more quickly because price rises did not get into wages, rents etc, to the same degree as in countries that just let the price shock cascade through their economy.
In NZ, we used some subsidies (too little too late) to take the edge of imported price shocks, but otherwise we relied on monetary policy, the very worse tool to handle a sudden imported price shock. Monetary policy works with a very long lag, by the time it started to nibble on inflation through the demand channel, it was way too late. Now we are destroying our economy and sending unemployment way higher than it needs to be - for what? Our progress on inflation is no better or worse than countries that left rates relatively low. Compare Australia to NZ for example.
I would also like to hear.
I'm on my 7th country in a month, some held up as being of a higher governmental standard, and they're all just as riddled with the same cost/wage issues we've had in NZ for the past 4 years (or 10 even), and often worse.
Governments and central banks have some degree of influence but they're eclipsed by market realities, and these are almost universal.
There has been a global change in the price level of critical goods - the cost of stuff we import is now 25% higher than it was in early 2020 and our export prices have gone up by about 13%. We import a third of what we consume. Our standard of living has reduced accordingly - same in other developed economies. Why can't we just have an honest conversation about it!
Definitely can and should.
My only problem being, I can't see how the overarching theme of the COVID/post COVID period can be altered much.
The only place I've been that is noticeably cheaper, hasn't allowed Maccas, KFC, and other multinationals to be involved in their food supply. But that also comes with lower investment, and wages (and even less affordable housing).
Pa1nter: "Governments and central banks have some degree of influence but they're eclipsed by market realities, and these are almost universal."
Not actually true. (But they're the same arguments used by neo-liberalists to encourage a hands off approach to economic management. So, good Polly, here's a cracker.)
Let's take one of our major dependencies: Oil.
NZ supplies 80% (often more) of its electricity from renewable sources. Or put another way, homegrown sources. So tell me, why isn't NZ going hellbent to remove our dependency on a product that causes NZ Inc. no end of economic pain?
Is it is perhaps because it is now GOVERNMENT POLICY to maintain this dependency? Why does government have this policy? Is it because they too like crackers? Golly. I think that could be it.
Not actually true.
Actually true. The central banks and governments weren't going to be able to fight the supply side issues between 2020-2022.
- stuff took longer to make
- stuff cost more to make due to resource scarcity, bullwhip effect, etc
- labour costs shot up - not just individual salaries mind, the fact much of the workforce was held up at home quarantined, isolated and sick meant you had a lot of labour not producing anything
We can make a case governments and central banks helped poor petrol on that dumpster fire, but it was always happening.
Your comments about renewables are slightly tangential, and we have to weigh how expensive it'd be to finance 100% renewables - especially when we know the cost of finance isn't fixed. We have also made the costs to get to 100% renewable significantly more expensive than that first 80% - some of which made the country broke in the short term.
For similar reasons our population aren't self sufficient in most of everything they need to survive.
Pa1nter: "The central banks and governments weren't going to be able to fight the supply side issues between 2020-2022."
So instead they pored petrol into the demand side and created the mother of all bonfires, right?
So tell me. How does that reconcile with you statement: "Governments and central banks have some degree of influence but they're eclipsed by market realities, and these are almost universal."
Keep digging.
Btw. My comments about electrifying NZ so we import less oil are NOT slightly tangential. They're bang on the money.
Pa1nter: "The central banks and governments weren't going to be able to fight the supply side issues between 2020-2022."
So instead they pored petrol into the demand side and created the mother of all bonfires, right?
So tell me. How does that reconcile with you statement: "Governments and central banks have some degree of influence but they're eclipsed by market realities, and these are almost universal."
Because we were always in for a hiding. Part of our issues stem from the government and central banks' response to the pandemic, that was always going to create chaos.
I feel like we haven't even finished adjusting the supply side. Its definitely much improved.
Provably nonsense.
They tackled it like a demand shock because it was a demand shock, which is easily seen by looking at volumes of consumption.
Growth in volumes of household consumption of durable goods spiked massively in 2021 to a massive 25 year high - that's after removing price effects and adjusting out lock down affected periods. Funnily enough, this came at the same time as durables-led inflation was peaking - if that inflation were driven by supply shocks, we'd expect to see consumption shrink in response, not to increase at a historically remarkable pace.
From mid 2022 onwards, durable consumption retreated and durable inflation started to give way to services inflation. Do you think this might possibly be connected to volumes of household consumption of services surging to just shy of their strongest 12 month growth on record from mid 2022 to mid 2023? Again, there is no way we would expect that effect if inflation were supply or cost-driven.
Jfoe, you're a smart and charismatic writer who presents a compelling story about the state of the NZ economy. The only problem is that the data shows your story is total BS.
The actual story: demand increased due to monetary stimulus and wage growth, and also shifted from services to durables and back again in response to covid restrictions - the latter being inflationary because of the inability of the market to adjust production immediately to such sharp changes in the area of demand.
Consumption increased partially because people were sitting at home buying stuff online, and everyone was putting in much larger orders than normal - because supply was so janky.
Demand AND supply both increased. There's cases made for the supply side of things to edge out demand in overall significance.
Here is the annual increase in the VOLUME of imported goods. Stats NZ Table OTV010AA for year ending June of the year shown...
- 2014 12%
- 2015 8%
- 2016 2%
- 2017 6%
- 2018 9%
- 2019 2%
- 2020 -5%
- 2021 2%
- 2022 10%
- 2023 1%
So, yes, demand spiked in 2022 playing catch-up as wholesalers restocked and consumers bought stuff they had postponed. But, demand actually grew by considerably more per year between 2014 and 2018 than it did in 2020 to 2023.
Now look at increases in the average weighted price of imports (same periods). What do you see?!? Do you really think our prices shot up because of excess demand? I accept that it played a contribution, but it was tiny compared to that huge imported price shock.
- 2014 -4%
- 2015 -5%
- 2016 0%
- 2017 -4%
- 2018 3%
- 2019 6%
- 2020 0%
- 2021 -4%
- 2022 15%
- 2023 13%
SNE043AA
4 quarter rolling average, year on year growth, 2020Q2 and 2021Q3 removed from averages because of lock down impact.
- Firstly, growth in consumption is not a "tiny contribution compared to that imported price shock", it's clearly bigger (durable consumption growth peaks at 15.6%, about 10% over it's long term average)
- secondly, no it did not spike in 2022 "playing catch up". The spike clearly started in late 2020 with peak growth rates in early 2021 - actually preceding the price growth, a clear indication of which way the causative relationship is. In 2022, completely contradicting your narrative above, consumption of durables actually reversed with a 3% fall compared to 2021, the first since 2009. One quarter later, 2023Q1, the rolling average had plummeted even further to its biggest fall on record (that's comparing the twelve months after border reopening in March 2022, to the 12 months preceding that). This is the exact opposite of your claim that consumption rebounded as supply challenges eased: in fact durable consumption collapsed as monetary conditions tightened and COVID restrictions loosened meaning people were able to spend on travel and domestic services again. As a result the supply challenges eased.
The patterns of durables consumption are the exact opposite - to an extreme extent - of what we'd expect to see if the shock were supply driven. The same can be said for services consumption and the services-led inflation since mid-2022.
Yes there were some genuine supply issues caused by covid-related disruption. But all the data consistently shows that demand dominated in NZ - and to a lesser extent in other developed nations with similar monetary responses. I'd guess that the excess demand overseas was probably of comparable impact to the genuine supply pressures - but both seem to have been much less influential than our own domestic demand.
You badly need to review your assessment on the supply / demand drivers because the data above is showing it's spectacularly wrong. I hope you're able to make that adjustment because you do have a lot of smart ideas and I enjoy your contributions to discussion here.
I'm not sure what your point is, everyone knows the money came from government spending (including but not limited to direct subsidies) and private credit creation. As I've said above there was also a clear substitution effect where artificially suppressed demand for services migrated to excess demand for services. I don't see how any of this contradicts or adds to what I've written above.
I genuinely appreciate the full response - thank you.
I think though that you are conflating two things here: quantity and price. Where we probably disagree is on the strength of the relationship between the two. I don't doubt that there were surges and slumps in demand. What I doubt is the impact of those domestic surges on our price structure. The only sector where I can see clear evidence of demand driving higher prices was in construction in late 2020 and 2021 when everyone went reno crazy. Others can see the *demand* data we're talking about here.
Incidentally, you cannot discount 2020Q2 and 2021Q3 without also discounting the same quarter a year later (2021Q2 and 2022Q3). If you take out all the matched pairs of COVID jumps / falls, you can see a clear reduction in the demand trend from the peak of the economic cycle in 2017. Demand growth actually went negative for durable and non-durable goods in early-2022, yet prices carried on rocking upwards.
Based on the above you must be of the belief that demand has almost no influence on price? In which case, yes, we would disagree. I don't think it's the only impact on price, and I do think supply has an impact too (and I think signalling and other factors unrelated to demand OR supply are a chunk of it!)
My view is that price increases can be driven by either
(a) scarcity (which reflects supply less demand which is kind of equally dependent on both factors - but clearly demand changed more in the lead up to that scarcity, so I'd blame that on demand more - I don't see how you can look at the consumption data and decide that supply was the bigger driver of scarcity in 2021/22? Or you think scarcity wasn't a big factor at all in recent inflation, in which case we'd disagree on that.
(b) opportunism I.e. Sellers realising they can increase prices because people can / will still pay - clearly demand driven. Requires an imperfect market, which in practice every market is.
(c) costs i.e. Unavoidable increases in the cost of supplying products that happen regardless of whether people can pay.
I think what at first glance looks like cost-driven inflation in recent years has often the just opportunistic increases echoing back from the end demand through to the earliest suppliers. In other words, money creation predictably floring to those with the strongest rent seeking power, at the base of the resource chain. That's why the "cost driven" inflation has a clear pattern of following demand, with a slight lag. If it was actually cost driven, we'd see little increase in consumption before the price change, and a sharp decrease following the change?
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I'm not sure I agree about needing to remove 2021Q2 and 2022Q3 from analysis, given I'm using an average of seasonally adjusted quarters. In either case, it doesn't materially change the analysis.
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On your last paragraph - I'm not sure what you mean about the fall in demand from 2017, but it's absolutely not what consumption data shows. And you're right that, as I have myself pointed out, durables demand fell off in 2022 ( in response to monetary policy and border reopening more than inflation imo - that one you can argue though). But I don't agree that inflation trucked on regardless - not in durables it didn't. The inflation after that point has been driven by services which - guess what - were reacting to a spike in consumption after covid restrictions lifted. (I do acknowledge that interest costs have also been a significant contributor to that services inflation - but demand has been at least part of it too)
I genuinely don’t understand how the market will hold up. There only seem to be headwinds short to medium term. Whilst immigration is high, the trend YOY shows that’s starting to decline. It might still drive higher rents as they pile 10 bodies into a 3 bedroom house, but cannot see it providing any real floor to actual house prices. They have not even cut rates yet and history tells us when that happens the market still declines for months due to the lag rates take to filter through the economy. Am I missing something?
We probably have a more biforcated economy than times past. Go out around town, there's still people in the shops and restaurants, and still crazy prices changing hands for housing and many other assets.
There's a sizeable chuck of the economy with money to throw around, but sadly also a greater amount of people struggling to rub 2 cents together.
Where that tipping point will be where the floor falls out, hard to say. Maybe a while, if they turn on the money printers in only another year or two.
Pa1nter you are not wrong there. I can see certain demographics not batting an eyelid as they brunch away at the cafes and shop at the higher end stores. You then go to areas with a younger demographic and the sales/closing down signs are hard to miss. Some business look quiet when it should be their busy period of the week/weekend. It definetly feels like we have a two tier society splitting apart. There was a highlighting conversation the other week at the office where some of the older staff were discussing DIY projects on their holiday homes while younger colleagues are discussing hacks to make cleaning products or bulking out meals with oats and lentils as their rents have just been raised. The older colleagues seem completely oblivious to the conditions on the ground, not that some of them actually walk the streets, as they complain about the homeless and beggars bothering them on the streets.
Pa1nter isn't wrong.
The richer are getting richer. And anyone not in this group are going nowhere, or backwards. What Pa1nter continuously fails to recognize - or more likely, refuses to acknowledge - are the reasons for it. Pa1nter prefers folksy hand wringing as it gets the 'likes'.
You got it
- we send you one super smart, early 20's, degree qualified mid level data analyst.. who will ad value to your exports, improve your productivity and pay millions in taxes toward your public services and infrastructure etc..
but we are smart so
- in return we import x10 super low skilled fruit pickers from the third world.. who add no value, cost the existing taxpayers more to provide infrastructure, increase our house prices (shed prices) and overload our public services whilst doing nothing for exports.
Pretty cool strategy hey!
I’ve got a question. Isn’t this how capitalism works? Resources end up in non productive areas ,such as housing, and then when those resources can be redistributed into more productive parts of the economy they are. A couple of caveats there, housing is productive. As in a 100m2 3 bedroom house, not so much a 250m2 3 bedroom 2 living area 3 bathroom flash pad. Plus capitalism is not allowed to work freely in our societies, we don’t like bad news, and certainly not losing money. Seems like we have created the ultimate can kicking scenario where we keep putting off the pain until it really hurts.
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