The Household Labour Force Survey provided another head-scratcher in the December quarter, with an apparent 0.9% jump in employment against market forecasts of a 0.7% fall.
However, the details of the survey confirmed that the labour market is indeed in decline, and provided further downside risk to what was already shaping up to be a dreadful Q4 GDP figure.
The employment figures have been remarkably volatile lately – for instance, last year we saw a 1.3% decline in Q1 that was fully reversed in Q2. The source of volatility is the number of people who declare themselves “not in the labour force” versus those who say they are “participating in the labour force”. Small sample sizes – an inevitable issue for small countries – can lead to substantial swings in this measure. And since the vast majority of people who declare themselves to be in the labour force are in work, participation and employment tend to lurch around in tandem. In fact, the participation rate also rose sharply this time, from 68.7% to 69.3%, whereas a fall in participation is more typical of a downturn. We expect to see a compensating decline in employment for the next quarter, in the order of -1.5%.
The unemployment rate is the better gauge of New Zealand’s labour market. It rose again to 4.6%, which was in line with our expectation and on the low side of market forecasts. The labour market is gradually easing in response to the ongoing recession. Although there have been well-publicized layoffs in certain industries, other industries which have struggled for years to attract staff are finally seizing the opportunity to fill vacancies, as demonstrated by the industry composition of employment over the past year. The industries most exposed to the housing market downturn and international crisis – agriculture, construction, and manufacturing – have reduced employment levels by between 2% and 5%. Meanwhile, education and health have experienced employment increases of 7% and 4% respectively, presumably addressing pre-existing staff shortages.
