Employment and Skills

Labour market results for the September quarter are expected to be mixed

Friday November 01, 2013 Shaun Twaddle

We started the second half of 2013 with the economy appearing to have some momentum behind it. Since then however, consumer and business confidence has dipped a little. Nevertheless, overall conditions remain positive. Despite these positive noises, the labour market conditions remain somewhat erratic and September quarter labour market results, released on 6 November, are unlikely to be as positive as many are hoping.

 

The June quarter Household Labour Force Survey (HLFS) results were a bit mixed. On a seasonally adjusted basis, the increase in the working-age population was matched by a similar increase in labour force participation, with employment up by 8,000 people from March and unemployment up by 5,000 people.  The number of people not in the labour force remained unchanged.

 

September quarter HLFS results are likely to be just as mixed as those in the June quarter, if not a bit worse. Unemployment is expected to continue to increase and employment is likely to remain flat. Why so pessimistic? Well, there are three main drivers influencing the pick – the number of people in New Zealand who are of working age, the number of people who are making themselves available for work and employer behavior.

 

The working age population, defined as people aged 15 years and over, has steadily grown over recent quarters. Early estimates from Statistics New Zealand show that this growth further strengthened in the September quarter. Why? Well, put simply, more people are arriving in New Zealand than leaving. Australia’s weakening economic prospects combined with the relative boost to our domestic activity through the Christchurch rebuild means that New Zealand looks more attractive to people than it has in recent years.

 

Many of these ‘extra’ people in the working age population are eventually going to want to make a contribution and seek employment. These people, coupled with recent benefit reforms, which have a strong focus on getting working aged people to look for work, will result in an increase in the overall supply of available labour. The question is, how many of these people will have found employment in the September quarter and how many will still be actively looking (unemployed)?

 

Well… that is where things are a little less clear cut. Whilst employment has increased over the couple of quarters, this growth appears to have been largely driven by increases in Auckland and Canterbury with employment growth in the rest of the country remaining relatively flat or negative. It is possible that, given the slight dip in consumer and business confidence in the second half of 2013, employers will focus on getting more out of their existing workers in terms of hours worked than getting more workers in. Average hours worked has been increasing for a couple of quarters now and it is anticipated that employers will continue to use this option in the short term rather than hiring new workers.

So, in summary – it is likely that the September quarter HLFS results will show:

 

  • An increase in labour supply
  • An increase in the number of people in the labour force and the labour force participation rate
  • An increase in unemployment levels and the unemployment rate
  • Employment levels to remain steady – potentially even drop slightly.

 

The above picks are broad, to say the least. But labour market results over the past year or two have been very erratic. One thing that most do agree on however, things will get better next year!