By Roger J Kerr
I have always dismissed the HLFS employment statistic as an economic follower or consequence, rather than providing any useful information as a lead indicator as to future economic performance.
The volatility in the surveyed series has become more pronounced of late and certainly the last two quarters’ outcomes appear particularly misleading.
The RBNZ have already expressed miss-trust of the HLFS employment results against the other employment trends they monitor, therefore there are no monetary policy implications from last Friday’s HLFS shocker.
The poor employment results may have become a political football; however that will not be affecting Graeme Wheeler’s view of the economy going forward.
Climatic conditions for grass growth (or lack thereof, as Hawkes Bay farmers informed me over the weekend) have a far greater impact on GDP growth than jobs numbers in New Zealand.
In any case, employment growth follows GDP growth, not vice-versa.
According to the HLFS employment numbers (refer chart below) the economy is headed for recession; however all the forward looking indicators (e.g. business confidence) and market pricing (e.g. NZ dollar and NZ sharemarket) point to GDP growth between +2% and +3% this year.
More jobs are going to come from the downstream food processing industries in New Zealand (e.g. Heinz-Watties, Tegel and Chinese owned infant formula plants) over coming years and the Government’s role is to foster that investment and thus new jobs through regulatory certainty on big issues like water.
Another question for the Government is whether they should be taking some kind of lead on the rationalisation in the sheep meat industry to create a ZESPRI or Fonterra for New Zealand export lamb.
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Roger J Kerr is a partner at PwC. He specialises in fixed interest securities and is a commentator on economics and markets. More commentary and useful information on fixed interest investing can be found at rogeradvice.com
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