How COVID-19 changed NZ’s labour force (Part 2)

Even before COVID-19 came to New Zealand at the end of March 2020, unemployment was at low levels. In the March quarter of 2020, the unemployment rate was 4.1 percent and there were 120,000 people unemployed. Two years on, the rate has fallen to 3.2 percent and the number to just under 100,000.

Like all the other tables in this article, Table 1 is based on data from Statistics New Zealand’s Household Labour Force survey (HLFS). It shows the fall, noted above, in the number of people who indicated that they were unemployed (i.e. were available and actively seeking employment). More remarkably, it reveals that unemployment affected males and females broadly equally, and that the fall in the numbers has also benefitted males and females to roughly the same extent. 

Table 1: Number unemployed, by sex ('000s)

However, it is important to note that, as was remarked upon in Part 1, the people who ceased to be unemployed have not necessarily moved into employment. Part 1 showed that the number of people in not in the workforce increased by almost as much as the number of unemployed people fell. A significant number of people have ceased to be either employed or looking for work.

It is also worth noting that, according to Ministry of Social Development (MSD) data, the number of people receiving Work Ready Jobseeker Support actually increased between the first quarter of 2020 and the same quarter of 2022. The reasons why there is an apparent conflict between what the HLFS indicates about the number of people unemployed and what the MSD says about the number of Work Ready Jobseekers are complex, but one possibility is that some people receiving Work Ready Jobseeker Support are not actually available and actively looking for work.

Table 2 shows that all the main ethnic groups experienced a decrease in unemployment during the past two years.  However, it reveals that in percentage terms, Māori unemployment fell less than unemployment in the other groups. The decrease in unemployment among people of Asian origin was especially large, and this reflects the fact that, as shown in Part 1, employment growth was greatest in this group.

Table 2: Number unemployed, by ethnic group ('000s)

Table 3 shows that, again in percentage terms, the decrease in unemployment was greatest among people whose highest qualification is a Level 4-6 certificate or diploma. People in this group are often technicians and trades workers. However, the number of employed people in this occupational group has not increased particularly fast in the COVID-19 era.  

Significantly, there has been a large percentage decrease in unemployment among people with no qualifications, and this matches the finding in Part 1 that employment of people in this group grew the fastest. However, the reasons why this has happened are not obvious.

Table 3: Number unemployed, by high qualification ('000s)

Table 4 reveals that the percentage decrease in unemployment has benefitted all groups, measured in terms of the duration of their unemployment.  However, it is encouraging to see that there has been a relatively large decrease in unemployment among people who have been out of work for more than one year. People who have been unemployed for that long often face great difficulties in re-integrating into work.

Table 4: Number of unemployed people, by duration of unemployment ('000s)

Underemployed people are those who have a job, but would like to be able to work more hours. What is significant about them is that, by contrast with the number of people who are unemployed, their number has actually increased.

Table 5 indicates that the number of underemployed people is now almost exactly the same as the number of unemployed people. It also indicates that the increase in underemployment has been greater among males than among females. Again, it is not immediately clear why this should be so.

Table 5: Number of people underemployed, by sex ('000s)

Lastly, Table 6 shows that there has been a small overall decrease in the number of young people who are not in employment, education or training (NEETs). However, this decrease has been only among young people in the 20-24 age group. The number of NEETs has increased slightly among those aged between 15 and 19. 

More worrying is the fact that the number of young people who are completely detached from the labour force is not much smaller than the overall number of jobless people who are actively seeking work. This should be a concern for the government, not only because it is in no one’s interests for young people to be detached in this way, but also because there are widespread labour shortages in the economy.

Table 6: Number of youths not in employment, education or training (NEETs) ('000s)

As to the future, it seems highly unlikely that unemployment will fall further. The labour market has been bolstered by considerable monetary and fiscal stimulus. However the monetary stimulus is already in the process of being unwound, and it will be difficult to sustain the fiscal stimulus indefinitely. Added to this, the global economy could easily fall into recession caused by a lack of consumer confidence fed by inflation and international conflict. 

Overall, the risk is that unemployment could rise as the result of a reborn phenomenon: stagflation.