Interest rates may now be going down, but that's not yet translating into renewed optimism about the jobs market.
The quarterly Westpac-McDermott Miller Employment Confidence Index fell by 2.2 points from 91.4 to 89.2 in the September quarter. And this was the lowest reading since the country was emerging from the first Covid-19 lockdown in 2020.
A reading below 100 indicates that more New Zealanders are pessimistic about the state of the labour market than are optimistic.
"The biggest driver of the weakness in confidence has been the perception that jobs are becoming much harder to find," Westpac senior economist Michael Gordon said.
"Job vacancies have been shrinking for some time, and in the last few months we’ve seen a turn to outright job losses."
The most recent unemployment figures, for the June quarter, showed that unemployment had risen during the quarter to 4.6% from 4.4% - well up on the low point of the cycle at 3.2% in 2022.
Gordon said results from the latest survey showed that the unemployment rate has continued to rise at a faster pace over the last year. "...We expect it to reach 5% for the September quarter."
Households also remained downbeat on the outlook for job opportunities a year from now, although that measure did tick slightly higher in the September survey, Gordon said.
"That outlook is probably a fair reflection of how the labour market tends to lag the broader cycle. We’re now two years into an economic slowdown, and while job vacancies have been falling for some time, it’s only in the last few months that we’ve seen outright job losses.
"Similarly, it’s likely that it will take some time for lower interest rates to work their way through the economy, and for businesses to find themselves back in the position of needing to find more workers."
Gordon said confidence fell in seven regions and rose in four.
"Notably, the biggest fall was seen in Auckland, and while Wellington remains the most downbeat region, Auckland is now not far behind. This is a useful reminder that although the public sector cutbacks have been widely reported, their experience has not been unique. It’s sectors such as construction, manufacturing and retail that have seen the most significant job losses to date."
The survey was conducted over September 1-11, 2024, with a sample size of 1,555. The margin of error of the survey is 2.5%.
18 Comments
In real terms the bottom was two years later. This will not be the same as to get that real increase the govt had to pump a massive deficit to get money into peoples pockets to borrow. Will Nicola do that in 2025/26? If not, I can't see a stable recovery here. We can't assume a whole lot of activity in lending for house prices will create jobs and stir economic activity overnight. For that to happen, the govt must step in and provide economic support by deficit spend.
Second point, if ConF and others are right in that the "neutral" rate is ~3%, anything above that is contractionary, killing jobs, businesses, trade, more jobs, more businesses. This is not a happy leverage story.
Shrinking job vacancies should be a flashing red light for an economy growing off population increases for more than a decade.
The authorities were banking on the assumption that "cashed-up" cooks and Uber drivers coming to NZ would add to demand for goods and services, requiring yet more workers to be imported and keep the pyramid scheme we call the NZ economy going strong.
What happens now?
I saw this play out first hand in a previous company where a mid-sized supplier well into his 60s couldn't keep his business afloat despite strong returns. The high staff turnover due to construction companies poaching senior workers and trainees at pay rates that were hard to compete with.
A mate and I even considered buying the business for a fairly low price but wasn't worth the effort at the time unfortunately.
I don’t agree with that. Unemployment reached about 6.5% after the GFC. Might push close to that this time but doubt we will exceed it.
There’s some significant structural differences to 2008 that will mitigate, including:
- starting point this time is a much more ageing workforce and profound skills shortages in some areas
- lots of working visas right now, if the work goes then they need to go home. This will buffer bad Employment outcomes in construction, retail and hospo in particular. I have said several times over the past couple of years that this is one of the pros of high immigration rates over the last 2-3 years
Another structural difference is that this one was caused by inflation which has now been quashed (hopefully), we should just return to normal once interest rates decrease (with a lag granted). During the GFC there were many major problems; finance companies going under, US mortgage debt problems, US banks going under, central banks doing all sorts of crazy shenanigans to prop things up, etc. It was always going to take a while to rebuild trust in the financial system.
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