Wednesday’s labour market data showed the New Zealand economy was still adding jobs in June, though not as quickly as the working-age population had grown.
The rising unemployment rate was more a symptom of slow job growth than widespread redundancies and layoffs. This aligns with anecdotes of firms reducing their headcount through attrition, such as not filling routine vacancies.
Roughly one-third of the public sector job cuts were from leaving roles unfilled, according to Finance Minister Nicola Willis. A June quarter survey of private firms suggested 25% had reduced their headcount but didn’t specify by how much.
Despite these headlines, the labour force participation and employment rates remain more or less unchanged from two years ago at 71.7% and 68.4%, respectively.
Flat employment suggests the economy has been adding jobs at roughly the rate of population growth, although a separate measure showed filled jobs falling by half a percent during the quarter.
Part of the reason for the uptick in the unemployment rate was that a number of working-age people chose to come off the sidelines and look for work. This is unusual in a weak job market, which often discourages people from seeking employment.
That said, the number of available potential job seekers did rise to a three year high in nominal terms — the population has grown during that time as well.
Many of the jobs added during the quarter were part-time. The number of part-time jobs increased 2.2% while full-time roles dropped 1.2%. Both annual figures remained roughly flat.
The underutilization rate, which measures people who have less work than they want, rose sharply, and the total number of hours worked fell.
Employment conditions are particularly challenging for young people entering the workforce for the first time and competing against more experienced candidates.
Almost half of the annual increase in underutilization was due to people aged 15 to 24 wanting more work.
Sector splits
Private sector wage growth has slowed to an annual rate of 3.6% from 4.3% a year ago, while public sector wages have continued to rise due to collective bargaining agreements.
Statistics NZ said these pay increases were for jobs such as health workers and early-childhood education staff, rather than policy analysts or Wellington jobs.
Speaking of public sector cuts, Wellington job numbers took a hit in the March quarter but seemed to recover in June. Unemployment fell from 4.6% to 4.2% and other metrics also improved.
The sectors suffering the most job losses over the past year have been manufacturing, hospitality, and professional support services — which covers a long list of office jobs.
During the June quarter, the construction sector lost jobs rapidly due to the building slowdown. The information, media, and telecommunications sectors also reported losses.
This is the human cost of crushing inflation. Prior to the data release, some economists were calling for the Reserve Bank to cut interest rates as soon as next week.
Wednesday’s data didn’t do much to back up this call. If anything, the labour market was slightly stronger than the Reserve Bank expected at its May Monetary Policy Statement when it said it would hold rates steady for a year.
Miles Workman, a senior economist at ANZ, said there was still a risk sticky domestic inflation pressures will hang around if the central bank eases too early.
Bond traders backed away from positions that almost fully priced in an August rate hike after the jobs data was released, and the Kiwi dollar climbed against its peers.
Stop work
Barbara Edmonds, the Labour Party’s finance spokesperson, said the Government needed to do more to stop newly jobless people from moving to Australia.
Speaking on Tuesday, she said the coalition should “take the handbrake off construction” by continuing to build the homes, schools, and hospitals Labour started.
Many of these projects have been paused or cancelled due to higher-than-forecast costs, contributing to a wider slowdown in the construction sector.
“It's Economics 101 that if the market is failing, the government should intervene. Otherwise, we are going to lose all this labour overseas,” Edmonds said.
Finance Minister Nicola Willis said she was focused on bringing down inflation, which would allow the Reserve Bank to lower interest rates and the economy to recover.
“We still have a fundamentally strong economy and a government focused on rebuilding it,” she said.
72 Comments
Yes.
Those struggling require low rates to prosper and survive.
We cant drop the cost of credit just to sustain what is actually a small portion of the population - at the expense of everyone else - entities need to adapt to the new normal and those that can't will sadly need to restructure or close.
The smarter businesses and people understand the economy and planned well in advance for the downturn and its features (eg higher cost of credit.. which is still actually reasonably low compared to other historical downturns)
It's unfortunate but the economy is cyclical and the downturns always have casualties. It's actually kind of a clear-out of the weaker entities that enables the stronger ones to grow.
Because this time the boom was prolonged and more pronounced the natural bust part of the cycle will be the inverse and sadly longer and deeper.
There is no way to shortcut the cycle without causing other problems we dont need.
Recessions used to be treated as a normal part of the economic cycle, until Govts and central banks decided that artificially interfering was a good idea. Recessions served to remove unproductive and inefficient businesses from the market, allowing remaining capital to flow to more productive and efficient ones and enabling them to grow. Not allowing this to happen simply means we have a high number of zombie businesses that continue to exist and absorbing capital by way of escalating debt for no additional economic return, and that operate as handbrakes on the new and more innovative companies' growth outlook.
You can only keep kicking the can down the road so long before you are have run out of road and are now stuck in the muddy swamp at the end of it wondering how Google maps got you so far off track.
Jobs losses always have a large lag to what’s happening real time. The market burp last week excited wholesale markets to raising odds of an ease next week which was entirely a sentiment rather than fundamental driven move. The underutilisation rate and a higher participation rate in a time when usually people drop out of looking as there’s less around demonstrates the pressure households are under. It’s clearer than crystal that we need to start lowering rates here but it’s impossible to predict what the RBNZ will do. However their pivot last meeting probably wasn’t as pronounced as the market reaction but more that it was in such contrast to the MPS prior. I doubt they will ease next week. What they should do and what they will do is not always the same.
Agree they will have less embarrassment resetting expectations this MPS and then cutting Oct or Nov, If the markets hissy fit again after the BoJ (we wont do it again the fed will need to take action this time, always a door RBNZ can take.
They cannot go from 2025 cuts to 50 bps in August without looking inept. I think they should cut now but pride cometh before being fired...
Going into the GFC, I had around 30 people doing trade work. I managed to find work for them for 2-3 years.
I couldn't do that at the moment. And the volume of new work getting priced in the market would be down a good 80% - so even less work going over the next 12-24 months.
I sorta felt by my early 20s working for someone else had limited prospects.
Not terribly impressive though, it is one thing to work out what people want, and provide it for them, it's harder still to scale and make a decent amount more from it. Every 5-6 people, you need to pay another manager, and then they have a vehicle, desk, etc etc. More people, bigger payroll to fund, more money to chase.
I valued my time poorly.
Pa1nter, I really value your posts. It's abundantly clear that you have "been there and done that" rather than posting from a theoretical point of view. Keep your posts coming. Also, how about getting a green tick next to your name to support David and his team, don't you think they deserve it?
The issue is that we had too much money sloshing around due to cheap credit, free handouts and equity released from overpriced houses (due to the cheap credit). Then we created jobs to serve the demand from the excess money.
The excess money/spend is now gone. It's not coming back. So companies don't need as many people to fulfill the deman anymore. So we have to find another way to create wealth than borrowing or increasing house prices.
That's the only way to bring back employment .. create demand for our products overseas. Generate export revenue and bring it back.. and/or increase the value of export businesses and invest in them to make money from the shares.
Don't bank on cheap credit to make money.. it's gambling.
Yes, we are simply back at "normal" unemployment levels. It will probably go higher as Labour increased benefit levels by 45% over their term, so many of the newly unemployed will now find they will be paid more on the benefit than actually working (for those that have children).
ABSURD.
Direct median house prices (biggest consumer item) are not in the CPI. These are falling in real and nominal terms so the real CPI is lower than our current measure.
The RBNZ can do nothing about non-tradeable inflation. It's debatable whether it should be in the CPI. Its a govt problem to fix. (Local govt rates (no efficiencies, no cost/benefit analysis, limited CGovt rates & funding, insurances (oligopoly))
The human cost of the unemployment is devastating. People and families thrown on the unemployment scrap heap destroying their lives. Govt should be providing Govt guaranteed jobs, UBI or paid retraining. Govt sets the overarching policy framework and is directly responsible for the unemployment.
And the true measure of unemployment tells an even worse picture. The underutilization rate, which measures people who have less work than they want, rose sharply, and the total number of hours worked fell.
The govt has engineered this recession. Public sector cuts (NZ bureaucrats/capita in wider govt is already similar to OECD average) Real gdp/capita falling, and unemployment forecast to be higher in 2026 than 2023.
The real economy gets screwed over by the govt while landlords get $3bn tax cut. Its simply appalling.
The economy needs to reset itself. Every boom is followed by a bust. EVERY TIME.
it can't and shoildnt be the governments job to bail everyone out in the bust.. it doesn't create an environment where people have to have personal accountabilityfor saving or building a resilient career or business during the boom and we MUST have personal accountability ir we would ALL gamble in the boom safe in the knowledge when it pops we
will be saved by govt (who counldnt then save anyone). Giving jobs to the unemployed also doesn't help keep salary levels down (which was a major contributing factor to inflation along with people spending money created by the booming house market) which is one goal of rbnz. More unemployed people isnt bad means lower wages and easier to retain and hire skills staff... the unemployed simply need to acquire the right skills to be attractive to hire.. which they should have been doing anyway.
The bust was always coming. People need to feel some pain and learn from it so as to better manage risk for next time it happens. But you can't bail out those that didn't manage their risk at the cost of those that did.. or noone will bother next time.. which is bad.
So long and short of it.. we are in a capitalist world.. where everyone is accountable for their own situation.
history just repeats over and over in cycles .... fashion trends, economic booms and busts, house prices.
The bigger and longer the boom - the deeper and longer the bust.
people learn from experiences not being told... so you gotta let them experience some hard learning soem times.
There wasn’t a boom, just a GFC followed by a 1:100 year pandemic.
The RBNZ let interest rates go way too low as direct median house prices aren’t in the CPI, and there is no comprehensive capital gains tax (investment properties) so we all felt super rich from land prices exploding. (This should never been allowed to happen.
Nor do we have compulsory social insurance in NZ. Capitalism is a pyramid of wealth and income and it’s always the poor that get screwed over.
boom: period of growth in salaries, low inflation, rising asset prices, low unemployment, cheap credit, stocks rise. appetite for investment risks increase. (gold cheaper)
bust: period of contraction, high inflation, reduced asset prices, stock falls, unemployment rises. appetite for investment risk descreases (gold expensive)
look at some economic charts (GDP/rates/unemployment/hosue prices/stock prices/bankrupcies).... over a very long period. say 100 years. the cycles are hard to miss. and since about 2011/12 - we have been on a boom.. extended in the pandemic by central banks... i think the average bust lasts about 1/6 of the boom cycle duration... so maybe 2-3 years for it to play out... then it will plateau for a while... then it will repeat.
for nz this time may be a little different due to the loss of our skilled youngsters to aussie - if they ride it out better than us we will lose a whole generation and may pay a much longer price as the number of boomers retires and we have a lower taxbase and population remaining.
"..for nz this time may be a little different due to the loss of our skilled youngsters to aussie"
There is nothing new under the sun....the same happened in the 90s...albeit with less debt... we are simply further on in the cycle..except the cycle is running out of effect.
That is the cycle of fiat.
How things have changed.
"In 1959 New Zealand had 21 unemployed people out of a population of 2,350,000"
And myth has it that Government Ministers of the day knew of each by name.....
Maybe if we had an Unemployment system similar the the USA our numbers might be a lot lower?
"Workers in most (US) states are eligible for up to 26 weeks of benefits from the regular state-funded unemployment compensation program, although 13 states provide fewer weeks, and two provide more."
Do you really think the path to low unemployment is creating destitution? What planet are you on?
Why not ask instead why unemployment was around 1% for 30 years until the 1970s? We used taxation and other policies to keep money moving around our domestic economy, and the Govt used house-building and infrastructure schemes like a kind of job guarantee. There was an explicit policy of ramping up infrastructure builds (and running deficits) when the economy slowed. Indeed, the Govt ran just 5 budget surpluses in 100 years and didn't run *one* budget surplus between 1951 and the mid-80s.
Any potential connection to the US dollar leaving the gold standard in 1971?
I don't think there has been an interest into not working. There for sure has been a loss of care for work or working because it doesn't provide any further in life than not working for many at this point.
The system is broken and younger generations aren't biting their tongue about it.
Good grief. I am not sure the next year is going to be as bad as post-GFC, but anyone who thinks that we are gliding into a soft landing here doesn't understand how the economy works.
Compare RBNZ forecasts to the actual unemployment rate and add in the trend through and after the GFC. What do you see? We are basically following the same track as we did through 2008 following the big rate hikes. Did the unemployment rate stop going up when RBNZ crashed the OCR from 8.25% in June 2008 to 2.5% in June 2009? No, it carried on going up and didn't peak until December 2009 (18 months after rates started to reduce). Same with company liquidations - big spike in mid-2009, but the trend didn't start coming down until late 2010.
The idea that the unemployment rate will just stop going up in late 2024 and hover at 5% is silly. What is going to stop that job loss <> reduced demand spiral?!? I can tell you what stopped the rate getting any higher in 2009/10 - the Key / English Govt turned on the spending taps! They pumped in around 4.5% of GDP in deficit spending for two years running and then got close to 7% in 2011 (Chch EQ). The current Govt is planning to do the polar opposite - turn off the deficit spending taps and attempt to achieve an economy-crashing surplus in a couple of years time. It is incredible to watch such incompetence playing out in real time.
Private debt at peak stupid 2009 was around 160% of GDP. It is currently a bit under 140%. We also have an OCR of 5.5% rather than 8.25%. So we are in a slightly better starting position. However, as above, if Govt don't fire the fiscal guns next year like Key and English did in 2009 and 2010, I agree that we could replicate or even exceed the depths we fell to in the GFC.
I've tried combining a few datasets to try and work that out but I don't have anything conclusive. I think the rapid spike in the youth unemployment rate is a direct consequence of net migration far outweighing job growth in the last year. It is also clear that inward migration meant about 50,000 'hard to fill' job vacancies were filled (bus drivers, care home staff, hospital staff etc), which boosted the jobs numbers in 2023 (and killed the health budgets!)
I suspect that new migrants will outcompete kiwis as the jobs evaporate and 2025 could get very messy, very quickly.
The rapid spike in youth unemployment is the direct replacement of NZ youth with overseas youth. 65,000 international students with work rights, 25,000 Working Holiday visa holders. Its not rocket science.
Its going to get a lot worse in a couple of months as the school/Uni year ends and all those graduating students start looking for full time work.
I remember trying to find a job after Uni around 2013. Wasn't the worst of it but there were that many applicants for every job it was a hard slog, and taught me that nobody hands you anything job-wise, you have to educate yourself, learn to sell yourself and be articulate for interviewing to ensure you put your best foot forward, and learn to read the room. Was one of the best life lessons looking back on it, so I'm sure the youth of today will either do the same, or head overseas and still have to learn this there.
The unemployment rate is still historically low. https://www.stats.govt.nz/indicators/unemployment-rate/ In fact it is still lower than it ever was under Key / English when we were considered the rock star economy. So far it is a soft landing, but still a way to go.
"... then we have almost landed."
Inflation beaten or not the unemployment rate (and consequent spending decline) will continue to increase for a protracted period...how protracted will depend upon whether it creates a cascading effect or not,(or if the Gov reverses fiscal position) but even without that the 'runway' is a long way off.
The list continues to grow....
https://www.stuff.co.nz/business/350371251/100-job-losses-proposed-spar…
Output is a function of (i) net increases in private debt, (ii) Govt spending (net of taxation), and (iii) how much people and businesses are saving. Net lending is negative in real terms, Govt spending is heading that way, and people are still saving (onshore and offshore investors). So the economy has stalled.
It's pretty obvious when you think about it. Put 10 people in a room and give them $100 each to buy things from each other. This little economy can work great until someone has control over something everyone else needs. Then they can charge more for the thing they are selling and save their surplus. This shows up as additional output - a surplus generated. However, within a few days, the economy collapses because one person has managed to get everyone elses money. The solution we found to this problem was credit - the guy with the market power can now carry on collecting a surplus, because the bank is pumping in fresh new money to keep things moving.
Jeez, where have you been…? One thing I’ve learnt from the various comments on here is that the bus has to go off the cliff & explode…then when the Serious Crash Unit arrive they’ll sigh in relief & high five each other while saying “this is the reset we needed” 🤷🏻♂️😂
Amazing how many intelligent folks on here forget about the lag effect…a cut this month is too late to stop the bus unfortunately 💥
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